Yen outlook shifts before BOJ rate hike

The Japanese Yen experienced sharp fluctuations during the summer. Japan's foreign exchange reserves fell to a record low of $1.208 trillion at the end of August, a decline of $79.6 billion (6.18%). A significant part of this decline was due to a drop in the value of foreign securities, especially U.S. Treasury bonds, which make up about 70% of the reserves, alongside vigorous interventions by Japanese authorities in the foreign exchange market, where approximately $98.7 billion was spent between July and August to support the currency. These interventions, along with expectations that the Bank of Japan would raise interest rates to 1.25% in September, contributed to the yen reaching its highest level in seven months against the dollar. Concerns are growing that tighter monetary policies may lead to further economic and financial oscillations.

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