In September, the dollar-yen exchange rate changed sharply, with the yen appreciating to the upper 152 yen level for the first time in about half a year. Behind this, expectations spread that Japan and the U.S. would act jointly to correct the yen's weakness, following remarks by U.S. Treasury Secretary Bessent and Bank of Japan board member Hajime Takada about "flexible responses." Additionally, dovish remarks from Federal Reserve officials also supported the dollar's decline. In the market, there is strong caution about the acceleration of the Bank of Japan's rate hike pace, and if yen-selling positions are further adjusted, a test of the 150 yen level could come into view after passing the January level of 152.10 yen. The focus now is on the U.S. August Producer Price Index (PPI) due on the 10th, the Consumer Price Index (CPI) on the 11th, and the Bank of Japan's monetary policy meeting on the 17th-18th.
Yen appreciation and expectations of BOJ rate hikes may lead to higher Japanese yields, but the article focuses on FX; for JGB 10Y, the dovish Fed and potential BOJ tightening could push yields up, but the immediate impact is ambiguous. However, the yen's strength often correlates with lower JGB yields due to reduced import inflation, so direction is neg.
