The Japanese yen fell in Asian trading on Monday at the start of the week, marking its second straight day of losses against the US dollar, as easing inflationary pressures reduced expectations for an imminent policy shift by the Bank of Japan.

With the likelihood of a rate hike in Japan later this month diminishing, investors are awaiting further signals to clarify the path of monetary policy normalization in the worlds fourth-largest economy.

Price Overview

USD/JPY: The dollar rose 0.25% to 147.38, compared to the opening level of 147.04, after hitting a session low of 146.84.

On Friday, the yen ended 0.1% lower against the dollar, its second loss in the past three sessions, after Tokyo inflation data came in below expectations.

Despite the recent pullback, the yen gained 2.45% in August its strongest monthly advance since April supported by rising expectations of at least two Federal Reserve rate cuts before year-end, alongside renewed concerns over Fed stability.

Bank of Japan Outlook

BOJ board member Nakagawa warned of risks from trade policy and said he is looking to the upcoming Tankan survey for guidance on the direction of monetary normalization.

Recent Japanese price data shows reduced inflationary pressures, giving policymakers room to maintain accommodative settings.

Market pricing currently assigns less than a 40% probability of a 25-basis-point BOJ rate hike at the September meeting.

Investors are closely monitoring incoming data on inflation, unemployment, and wages in Japan, as well as further commentary from BOJ officials, for clues on the timing of any future tightening steps.