JPY Monthly - September 2025

USD/JPY: Movement in Japan and US monetary policy

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Summary

The dollar weakened at the start of August after the US employment report but traded without clear direction afterward. In Japan, fiscal concerns lingered and BOJ rate hike expectations resurfaced, but this did not lead to strong yen buying. In the US, the dollar's uptrend from July came to an end as markets saw a September rate cut as a certainty. Intervention by the Trump administration in Fed appointments also weighed on the dollar. Our base case for September is gradual dollar weakness and yen strength as the stance of both central banks becomes clearer. Political risk in the US and Japan poses downside risk for the dollar and the yen, and the USD/JPY could see sharp moves in either direction if such risks materialize.

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