The Japanese yen has recently strengthened against the U.S. dollar as expectations grow that the Bank of Japan (BoJ) might shift toward a tighter monetary policy. For years, the BoJ has maintained ultra-low interest rates to support economic growth and avoid deflation. However, with Japan now experiencing higher inflation and improving economic conditions, investors are speculating that the BoJ may adjust its policy stance. This shift could involve moving away from negative interest rates or other accommodative measures that have historically kept the yen weak against other major currencies .
In recent days, the yen’s rise reflects growing confidence among investors in a potential BoJ pivot, particularly as inflation in Japan persists above its target. This has placed additional pressure on the U.S. dollar, which has softened amid market anticipation that the Federal Reserve may pause rate hikes due to slower GDP growth in the U.S. These contrasting expectations for Japanese and U.S. monetary policy have created momentum for the yen in forex markets .
