The Japanese yen rose during Asian trading on Thursday against a basket of major and minor currencies, beginning to recover from its lowest level in three and a half months against the US dollar, as buyers stepped in at lower price levels. However, despite today’s rebound, the yen is on track to post its biggest monthly loss in 2025.

As expected, the Bank of Japan decided to keep short-term interest rates unchanged for the fourth consecutive meeting, while raising inflation forecasts over a three-year horizon. The bank stated it would raise interest rates if economic and price conditions align with expectations.

Price Overview

• USD/JPY today: The dollar fell by 0.6% to ¥148.59, down from an opening of ¥149.47, after hitting a session high of ¥149.48.

• On Wednesday, the yen dropped by 0.7% against the dollar — its fourth loss in five sessions — reaching a three-and-a-half-month low of ¥149.54. The decline was driven by strong US economic data and a hawkish Federal Reserve meeting.

Monthly Performance

In July — which concludes with today’s price settlement — the Japanese yen has declined by 3.35% against the US dollar, making it the largest monthly loss of 2025 so far, specifically since December 2025.

This monthly loss is attributed to weaker demand for the yen as a safe haven, amid improving trade developments between the US and its key partners, and growing political uncertainty in Japan after the ruling party lost the upper house elections.

BOJ Holds Steady

As widely expected, the Bank of Japan left its current monetary policy tools unchanged on Thursday, maintaining the interest rate range at 0.50% — the highest since 2008 — for the fourth consecutive meeting.

The decision to hold rates steady was unanimous among the board members. Policymakers indicated they prefer to take more time to evaluate the impact of growing global economic risks, including rising US tariffs, on Japan’s fragile recovery.

Monetary Policy Statement

In its policy update, the BOJ reiterated its willingness to raise interest rates if economic and price conditions evolve as projected.

“The economic outlook remains surrounded by multiple risks,” the BOJ said. “In particular, how trade and other policies develop in each region — and how global economic activity and prices respond — remains highly uncertain.”

Inflation Forecasts

The BOJ raised its core CPI forecast for fiscal year 2025 from 2.2% to 2.7%, the 2026 projection from 1.8% to 1.7% (revised downward), and the 2027 estimate from 1.9% to 2.0%.

Rate Outlook

• Market pricing now reflects over a 50% chance of a 25-basis-point rate hike at the BOJ’s September meeting.

• Investors are awaiting further data on inflation, unemployment, and wage growth in Japan to recalibrate expectations.

Kazuo Ueda Speech Expected

BOJ Governor Kazuo Ueda is scheduled to speak later today to discuss the policy meeting results. His comments are expected to provide further insight into the timing and pace of future rate normalization and potential rate hikes through the remainder of the year.

At the conclusion of its June 30–July 1 meeting, the Bank of Japan’s Policy Board announced on Thursday morning that it would leave interest rates unchanged at a range of 0.50% — the highest level since 2008 — in line with most global market expectations. This marks the fourth consecutive meeting with no rate change.

The decision to maintain the short-term interest rate was unanimous, with all nine members of the central bank’s board voting in favor.

Policymakers at the Bank of Japan appear inclined to spend more time assessing the potential economic impact of looming US tariff hikes, particularly on Japan’s export-dependent economy.

The Federal Reserve announced on Wednesday its decision to keep the interest rate unchanged in the range of 4.25% to 4.50%, marking the fifth consecutive hold.

The Federal Reserve is widely expected to keep interest rates unchanged on Wednesday, amid internal divisions over the future path of monetary policy, as President Donald Trump and other White House officials intensify pressure on the central bank.

Trump escalated that pressure on Wednesday morning, following the release of economic data showing US GDP grew at an annualized rate of 3% in the second quarter.

Writing on Truth Social, Trump said: “Too late, the rate must be cut now,” repeating the nickname he’s used this year for Fed Chair Jerome Powell.

Investors will be watching closely to see whether two Fed governors side with Trump and dissent from the monetary policy decision — something that hasn’t happened in more than three decades. Governors Christopher Waller and Michelle Bowman have both publicly made the case for a rate cut at today’s meeting.

Michael Feroli, chief economist at JPMorgan, said he expects Waller to dissent, noting that Bowman’s stance is less clear. “We doubt she’ll join him in an outright dovish dissent,” he added.

Wilmer Stith, lead bond portfolio manager at Wilmington Trust, said one dissent is more likely than two. But he noted, “Ultimately, it doesn’t change the fact that the Fed funds rate will stay put and the bank will remain patient. That’s the narrative.”

This raises another key question for investors: Will Powell hint in his afternoon press conference at openness to a rate cut in September? Traders are currently betting that the Fed will deliver its first rate cut of 2025 at the upcoming September 16–17 meeting.

Stith said he believes Powell may offer dovish language laying the groundwork for such a move, following months of criticism from Trump and other administration officials, who are now also pointing to the Fed’s $2.5 billion headquarters renovation project as further grounds to question Powell’s leadership.

“Given the cost overruns on the [Fed headquarters] project and the ongoing criticism from the administration, I think it weighs on the psyche. A politician might just crack the door open slightly. Before, the door was always shut,” said Stith.

Powell has defended the $2.5 billion renovation project, while also emphasizing in recent months the need for more time to assess the inflationary impact of Trump’s tariffs.

Many other policymakers agree with Powell, noting that inflation remains above target, inflation risks are still present, and the labor market is close to full employment.

Waller, however, has argued since the June meeting that the tariffs cause only one-time price increases — allowing the Fed to “look past them” and refocus on the employment side of its dual mandate.

He also voiced concern that private-sector job growth is nearing a “stall speed.” Other data point to rising downside risks in the labor market.

Bowman’s rationale for a rate cut lies in recent inflation readings that have come in below expectations, and her belief that trade policy will have only “modest effects” on inflation.

She also expressed concerns about labor market risks due to signs of weakening employment trends.

Bowman’s support for a rate cut marks a shift from her stance last fall, when she opposed a 50 basis point cut in September 2024, citing concerns that inflation was not yet under control.

It would be the first time since December 1993 that two Fed governors dissented in the same meeting. Back then, under former Fed Chair Alan Greenspan, Governors Wayne Angell and Lawrence Lindsey opposed the bank’s dovish policy and favored a rate hike instead.

Of the 61 meetings Powell has presided over, there have been 16 dissenting votes. Fourteen of those came from regional Fed presidents, and only two from Board governors.

In July 2019, there was a rare double dissent from regional Fed presidents, when the Powell-led Fed cut rates for the first time in a decade to counter uncertainty from Trump’s first-term tariffs.

Kansas City Fed President Esther George and Boston Fed President Eric Rosengren opposed that cut, arguing that rates should have been left unchanged.

Despite any potential dissents on Wednesday, most observers expect Powell to defend the Fed’s patient stance for the remainder of 2025.

“The Fed’s not going to do anything, and I think Powell will stick to his guns — he’s got, frankly, a strong footing to stand on,” said Christian Hoffmann of Thornburg Investment Management in comments to Yahoo Finance.