The yen weakened on Monday after the Bank of Japan's rate hike failed to convince investors of a genuinely hawkish shift, with traders now watching for possible currency intervention. UBS Asset Management portfolio manager Kevin Zhao says any fresh intervention would be an opportunity to sell the yen.
The dollar rose 0.2% against the yen to 157.20 yen on Monday, with Japanese markets closed for a three-day holiday and liquidity thin. Traders stayed on alert for signs Tokyo might step into the market.
A hike that didn't convince markets
The Bank of Japan raised its policy rate to 1.25% on September 18, a 25-basis-point increase and the first hike in three months. That takes the benchmark to its highest level in 31 years. But the decision passed 7-2, with policymakers Toichiro Asada and Ayano Sato dissenting, and Governor Kazuo Ueda's post-decision messaging stayed cautious.
Kevin Zhao, a portfolio manager at UBS Asset Management, said the hike doesn't signal a genuinely hawkish turn, so the yen's structural weakness isn't going away anytime soon. He said any further intervention by Japanese authorities to prop up the currency would offer a good opportunity to sell it.
Rate checks signal intervention risk
The yen fell sharply after the BOJ decision before a slight rebound, as the Nikkei newspaper reported that Japanese officials had conducted rate checks, often seen as a precursor to intervention. According to Reuters: "…help to dampen market expectations for how much the yen will be allowed to weaken…", said Lee Hardman, senior currency analyst at MUFG.
Japan has not been sitting idle this year. On July 31, 2026, Japan and the US executed a joint yen-buying intervention, the first coordinated effort of its kind in 15 years. Total Japanese currency interventions in 2026 have now exceeded $100 billion equivalent. The yen had slid to a four-decade low of 163.99 per dollar in July before that coordinated action helped lift the currency.
A more hawkish Fed complicates the picture
The Federal Reserve and the European Central Bank also raised rates this month, both warning further tightening might be needed. Traders are now pricing in a 55% chance of a Fed rate hike at the October meeting, up from 43% a week earlier.
Even so, the yen had firmed to its strongest level in seven months in early September as traders bet on faster BOJ hikes, but it has since surrendered some of those gains. Speculators had grown more bullish heading into the BOJ meeting, with net-long yen positions swelling to $9.7 billion in the week to September 15, the largest since July 2025. Those positions are now being tested as the dollar index held steady at 100.23 after gaining more than 1% last week on the Fed's own hike.
Sources: Investing.com, Crypto Briefing
Trading involves risk.
Risk Disclaimer
