Summary
The USD/JPY rose in July due to continued yen weakness and a stronger dollar. Concerns about fiscal policy tied to the upper house election contributed to selling of JGBs and the yen. Meanwhile, progress in tariff negotiations prompted the BOJ to revise its inflation outlook upward and begin laying the groundwork for resuming rate hikes. However, this was not enough to drive a shift to yen strength, partly because expectations for an actual hike remain distant. For now, domestic political uncertainty is likely to persist, keeping the tone yen-bearish. In the short term, the pair may rise above 150, with levels just below 152 coming into view, which were seen before the "reciprocal" tariffs were announced in April.
