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      MUFG Warns Yen Vulnerable Amid Rising BOJ Rate Hike Expectations

      MUFG has reported that expectations for a Bank of Japan (BOJ) rate hike at the upcoming September meeting have surged to approximately 80%. This increase is attributed to recent reports and rising oil prices, with markets also pricing in about a 50% chance of two rate hikes by the end of the year. However, despite these heightened expectations, the yen has not strengthened, indicating a disconnect between market sentiment and currency performance.

      The bank highlighted that July inflation data, released on August 21, showed an acceleration in price growth, reinforcing the case for further rate increases. Concurrently, long and super-long Japanese government bond yields are under upward pressure due to speculation about next fiscal year's budget and a potential Cabinet reshuffle. The Nikkei 225 index has also struggled to gain traction, further complicating the outlook for Japanese assets.

      MUFG noted that the yen has weakened against currencies other than the dollar, with the USD/JPY pair hovering just below the intervention-sensitive level of 160. The bank cautioned that if the BOJ does not align its actions with the market's expectations, it could lead to further yen weakness. The central bank's communication strategy will be crucial in shaping market expectations as it prepares for its next meeting in mid-September.

      © 2026 KLEA News. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

      Source: KLEA News

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