06:58 AM EDT, 07/14/2025 (MT Newswires) -- The yen has weakened the most this month among G10 currencies against the U.S. dollar, resulting in USD/JPY hitting a high overnight Sunday of 147.57, said Mitsubishi UFG.

The yen has failed to gain support from rising yields in Japan, wrote the bank in a note. The sell-off at the longer end of the curve has resumed this month, lifting the 30-year Japanese government bond (JGB) yield back up to within touching distance of the high from May 21 at 3.20%.

In contrast, yields at the short end of the curve have remained more stable, stated MUFG. The main news overnight Sunday from Japan was that the Bank of Japan is likely to consider raising at least one of its inflation forecasts at its policy meeting later this month.

The inflation forecast for this fiscal year of 2.2% will probably be increased after food inflation proved stronger than expected back in early May, added the bank. Higher oil prices provide another reason for considering an upward revision.

However, the report went on to add that the BoJ sees little need to make any major changes to its big picture outlook for the economy and inflation. Trade policy uncertainty remains elevated after United States President Trump threatened last week to put in place 25% tariffs on Japan from Aug. 1. It should keep the BoJ "cautious" over hiking rates further until a trade deal is reached with the U.S. which has been encouraging a weaker yen, according to the bank.

A the same time, the yen and long-term JGBs are coming under selling pressure ahead of next Sunday's Upper House election. If the government were to lose its majority in the Upper House it would increase the risk of looser fiscal and monetary policies, noted MUFG.