JPY Monthly - July 2025

USD/JPY: Shifts in BOJ and Fed monetary policy look likely

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Summary

The USD/JPY was flat around the 140 mark after renewed dollar selling pressure emerged amid speculation of an early nomination for the next Fed chair, while yen selling dominated as US-Japan trade talks made no progress and expectations for a BOJ rate hike failed to recover. The outcome of the bilateral negotiations in July and the details of any agreement will likely influence the outlook for BOJ policy and determine the direction of the USD/JPY. The BOJ's Outlook Report in July could include an upward revision to its forecasts, putting a rate hike at the September meeting back on the table, if the deal includes concessions beyond the BOJ's baseline assumptions, such as the elimination of auto tariffs. However, the direction of oil prices and other new downside risks for the yen also warrant attention.

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