Japanese Yen Holds Ground As BoJ Expected To Adopt Hawkish Tone

USD/JPY stays subdued as Japanese Yen gains on expectations of a more hawkish BoJ tone this week.

  • USD/JPY stays subdued as Japanese Yen gains on expectations of a more hawkish BoJ tone this week.

  • Traders expect the BoJ to keep rates unchanged on Thursday.

  • Fed expected to hold benchmark rates steady in the 3.50%–3.75% range on Wednesday.

Japanese Yen holds ground as BoJ expected to adopt hawkish tone

USD/JPY remains under pressure for a third straight session, trading near 159.00 during Asian hours on Wednesday. The pair stays subdued as the Japanese Yen (JPY) gains support on expectations that the Bank of Japan (BoJ) could adopt a more hawkish tone at this week’s policy meeting, with a weaker Yen and rising oil prices from the Iran conflict fueling inflation concerns.

Despite this, the BoJ is expected to leave rates unchanged on Thursday as it assesses Middle East risks to the economy. Meanwhile, Prime Minister Sanae Takaichi will meet US President Donald Trump after he withdrew a request for Japan to deploy warships to the Strait of Hormuz.

The US Dollar (USD) holds firm against its peers, supported by cautious market sentiment ahead of the Federal Reserve’s policy decision. According to the CME FedWatch Tool, markets broadly expect the Fed to keep its benchmark interest rate unchanged in the 3.50%–3.75% range. If confirmed, it would mark a second consecutive pause, highlighting a cautious approach amid growing economic and geopolitical uncertainty.

Investors are also awaiting guidance from Fed Chair Jerome Powell on how the recent rise in oil prices may influence the policy outlook. Crude prices could extend gains following US military strikes on Iranian coastal sites near the Strait of Hormuz, citing threats from anti-ship missiles to global shipping, according to Reuters. The BBC also reported that Israel claimed responsibility for strikes that killed senior Iranian officials, including Ali Larijani and Basij chief Gholamreza Soleimani.

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