Yen Awaits Crucial Central Bank Week as Markets Brace for BoJ and Fed Decisions

The Japanese yen remained under pressure on Friday, with the US dollar trading near 160.20 yen as investors shifted their attention to a pivotal week for global monetary policy.

Markets are increasingly expecting the Bank of Japan to raise interest rates at its upcoming meeting, a move that would mark another step away from the country’s long-standing ultra-loose policy stance. However, traders remain cautious about how much support such a decision could provide for the yen.

The key question is not whether rates will rise, but whether Japanese policymakers signal additional tightening ahead. If officials stop short of indicating further increases, the currency could struggle to sustain any gains despite a rate hike.

Attention is also turning to the United States, where investors will closely watch the Federal Reserve’s next policy meeting. The gathering will be particularly significant as it marks the first meeting chaired by the Fed’s new leader.

Market participants will be scrutinizing the central bank’s statement and economic outlook for clues about the future path of US interest rates. Persistent inflation and a resilient US economy have strengthened expectations that policymakers may keep rates elevated for longer, a scenario that could continue to support the dollar.

The contrast between US and Japanese interest-rate policies has been one of the main drivers of currency markets in recent years, helping push the dollar to historically strong levels against the yen.

For now, the currency pair remains close to 160 yen, reflecting a market reluctant to make major moves ahead of next week’s high-stakes decisions.

With both Tokyo and Washington preparing to reveal their policy outlooks, investors expect the coming days to play a crucial role in determining whether the yen can regain momentum or whether the dollar’s dominance will continue through the second half of 2026.