Summary
The BOJ raised its policy rate and indicated it was ready to continue raising rates. Speculators have been unwinding short yen positions, which have been driving the rise in the USD/JPY since the start of the year, and the rise in yen procurement costs will probably make it difficult for speculators to short the yen to the same extent as to date. Meanwhile, the gap between domestic and overseas interest rates is likely to continue to narrow gradually as the Fed is also expected to begin cutting rates in September. We do not expect the USD/JPY to continue to fall at the same pace as it has over the past month, but it could be at the start of a medium-term downtrend.
