Yen begins to recover as Bank of Japan meeting gets underway

The Japanese yen rose against a basket of major and minor currencies in Asian trading on Thursday, beginning to recover from a two-week low against the US dollar and heading for its first gain in four days, as buying emerged at lower levels alongside a pullback in the US currency and a halt in the rise of the 10-year US Treasury yield.

The Bank of Japan begins its monetary policy meeting later today, with its decision due on Friday. The central bank is widely expected to raise interest rates by 25 basis points to 1.25%, the highest level in three decades, marking its second increase in borrowing costs this year.

The Price

• The US dollar fell 0.25% against the yen to ¥155.88, from an opening price of ¥156.25, while recording a high of ¥156.31.

• The yen ended Wednesday’s trading down 0.75% against the dollar, marking its third consecutive daily loss and hitting a two-week low of ¥156.41, following the Federal Reserve’s hawkish meeting.

US dollar

The US Dollar Index fell 0.1% on Thursday, retreating from a seven-week high of 100.37 points and reflecting a pause in the US currency’s gains against a basket of global currencies.

The decline comes amid correction and profit-taking activity as investors await further evidence on the path of US interest rates.

The yield on the 10-year US Treasury note fell 0.6% on Thursday, retreating from its highest level in 19 years and putting downward pressure on the US dollar.

Bank of Japan

The Bank of Japan begins its sixth monetary policy meeting of 2026 later today, with its decision due on Friday. The central bank is expected to raise interest rates by around 25 basis points to 1.25%, the highest level since 1995, marking its second rate increase this year.

The bank is also expected to provide further signals about whether it intends to continue raising interest rates in the coming period to counter inflationary pressures stemming from the war in the Middle East.

According to a Reuters report, four sources familiar with the Bank of Japan’s thinking said the central bank is preparing to raise interest rates this week, most likely by 25 basis points, and could signal a faster pace of monetary tightening in the future if price pressures increase the risk of inflation overshooting its target.

The sources said the Bank of Japan is unlikely to have a predetermined view of the terminal interest rate, as this will depend on how previous rate hikes affect the economy and the extent to which companies pass higher input costs on to households.