The yen strengthened over recent sessions, pulling USD/JPY back towards the 155.00 support level that has held several times this year, including after late April/early May and late July/early August moves. This time, the shift has been framed as fundamentally driven rather than intervention-related, as expectations for tighter Bank of Japan policy have quickened and fiscal-policy concerns remain in focus.
Bank of Japan Policy Expectations
Market pricing has moved towards a Bank of Japan rate rise this month, with reporting pointing to a 25bps increase and less emphasis on earlier talk of a 50bps move. Derivatives imply almost 50bps of cumulative tightening by year-end, and just over 75bps by mid-next year, slightly faster than forecasts that look for a further 75bps of hikes.
GPIF Asset Allocation Speculation
The currency has also drawn support from renewed speculation that the GPIF could tilt its asset allocation towards domestic assets, a shift that would reduce capital outflows.
