Japanese Yen Weakens as USD/JPY Surges Toward 147.50 on Dovish BoJ Outlook

USD/JPY Surges on Dovish Bank of Japan Rate Expectations

The Japanese Yen (JPY) remains under pressure during early European trading hours on Monday, with the USD/JPY pair rallying toward the mid-147.00s, hitting its highest level since May 14. This sharp upward move reflects investors' waning confidence in a Bank of Japan (BoJ) rate hike in the near term, with the anticipated policy shift now delayed to Q1 2026.

JPY Weakness Overpowers Domestic Data and Geopolitical Risks

Despite the release of stronger-than-expected Japanese CPI and PMI figures, market reaction has been muted. Japan’s National CPI remains well above the BoJ’s 2% inflation target, and upbeat June PMI data suggest resilience in the economy. However, JPY bulls show little optimism, as traders increasingly doubt the BoJ’s willingness to act amid US-Japan trade tensions and global uncertainty.

US Dollar Recovery Adds Fuel to the Rally

Meanwhile, a minor rebound in the US Dollar (USD) adds to the upward momentum in USD/JPY. Safe-haven flows into the Greenback continue amid escalating Middle East tensions, although the Japanese Yen fails to benefit from its traditional safe-haven appeal.

With buyers in control and no immediate signs of reversal, the path of least resistance for USD/JPY appears to be higher, especially if US economic data and global risk sentiment continue to support the Dollar.

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