The United States and Japan carried out their first coordinated yen intervention since 2011 on August 2-3, spending an estimated $36-59 billion to defend a currency that had fallen to around 164 yen per dollar, its weakest level in nearly forty years. US Treasury Secretary Scott Bessent publicly criticized the Bank of Japan on August 2, calling it behind the curve on monetary policy normalization. The Bank of Japan kept its policy rate unchanged at 0% during its July 30-31 meeting while signaling that tightening could come at its next meeting on September 16-17, with analysts increasingly pricing in a September rate hike. The September BoJ meeting is shaping up as the most significant monetary policy event for investors with exposure to Japanese assets, as a rate hike could trigger a selloff in Japanese government bonds, weigh on the Nikkei, and unwind carry trades that have benefited global equity markets.
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