Yen pares BOJ-fueled declines amid report of a rate check

The yen pared declines on Friday, with the Nikkei newspaper reporting that the Bank of Japan inquired with market participants about exchange-rate levels, a step often seen as a precursor to official intervention.

Japan’s currency had been down more steeply earlier in the session after the BOJ delivered a widely expected interest-rate increase, but disappointed traders who were hoping for clearer guidance from the central bank indicating plans to raise borrowing costs further.

The Japanese currency was down 0.5% at ¥156.75 per dollar at about 3:45 p.m. in New York, after losing as much as 1.3% earlier in the session. The Nikkei reported, without saying where it got the information, that the BOJ had conducted what traders dub a “rate check.” The report comes just weeks after a historic joint intervention by U.S. and Japanese authorities aimed at supporting the beleaguered yen, which roughly two months ago touched its weakest level in decades.

“With the yen depreciating sharply in spite of last night’s BOJ hike, today’s rate check is yet another warning shot to the market,” said Alex Cohen, a currency strategist at Bank of America. The Ministry of Finance “has shown a willingness to expend large amounts of reserves to intervene, and this should again have the market on notice.”

The Ministry of Finance couldn’t immediately be reached for comment outside of regular business hours.

Earlier Friday, the yen weakened to about ¥158 per dollar after BOJ Gov. Kazuo Ueda sent mixed signals on the path for future hikes following the bank’s increase. While he said the stage for policy setting has shifted, he also said it was difficult to determine the terminal rate for the current tightening cycle. Analysts saw his remarks as falling short of the market’s increasingly hawkish expectations.

The decision also drew dissents from board members Toichiro Asada and Ayano Sato, adding to uncertainty over the pace and extent of further tightening.

The yen rallied at the start of this month, fueled by expectations of faster BOJ tightening, an unwind of yen-funded carry trades and speculation that Japanese pension funds could shift more money to domestic assets. But the Federal Reserve’s hawkish hike this week has renewed pressure on the currency, with strategists warning the dollar-yen rate could climb toward ¥160 if investors conclude the BOJ will struggle to keep pace with the Fed’s tightening.

“This is too little, too late,” said Win Thin, chief economist at Bank of Nassau 1982. “The BOJ had another chance to go big and they missed it, same as July. If they really wanted to boost the yen, they should have hiked more than expected and then intervened massively.”

Japan has entered a holiday period through Wednesday, when thinner liquidity could amplify the impact of any official intervention. Authorities used a similar window around the Golden Week holiday in May, first stepping in after the yen weakened beyond ¥160 just before the holidays and then apparently intervening again during the thinly traded period.

The yen slumped to about ¥164 per dollar in July, its weakest in four decades. The slide set the stage for a coordinated U.S.-Japan yen-buying operation, the first since 1998, which raised the stakes for traders betting against the yen. Japan spent a record ¥15.4 trillion on intervention in the month through Aug. 26, according to Finance Ministry data. U.S. Treasury Secretary Scott Bessent has since continued to signal support for a stronger yen.

Still, some of the fundamental pressures weighing on the yen remain in place, including Japan’s wide interest-rate gap relative to other major economies and concerns over the fiscal outlook under Prime Minister Sanae Takaichi’s expansionary spending plans.

A weaker yen helps the nation’s exporters, but it also makes it harder for the BOJ to stabilize inflation at a time when oil prices are soaring on global markets. The country imports the bulk of its energy needs.

Intervention can squeeze speculative yen shorts, but its ability to produce a lasting reversal may depend on monetary policy. However, hedge funds turned positive on the yen for the first time since mid-2025 in the week ended Tuesday, according to Commodity Futures Trading Commission data released on Friday. They’d been reducing their bets against the yen.