The Japanese yen rose during Asian trading on Thursday against a basket of major and minor currencies, beginning to recover from its lowest level in three and a half months against the US dollar, as buyers stepped in at lower price levels. However, despite todays rebound, the yen is on track to post its biggest monthly loss in 2025.

As expected, the Bank of Japan decided to keep short-term interest rates unchanged for the fourth consecutive meeting, while raising inflation forecasts over a three-year horizon. The bank stated it would raise interest rates if economic and price conditions align with expectations.

Price Overview

USD/JPY today: The dollar fell by 0.6% to 148.59, down from an opening of 149.47, after hitting a session high of 149.48.

On Wednesday, the yen dropped by 0.7% against the dollar its fourth loss in five sessions reaching a three-and-a-half-month low of 149.54. The decline was driven by strong US economic data and a hawkish Federal Reserve meeting.

Monthly Performance

In July which concludes with todays price settlement the Japanese yen has declined by 3.35% against the US dollar, making it the largest monthly loss of 2025 so far, specifically since December 2025.

This monthly loss is attributed to weaker demand for the yen as a safe haven, amid improving trade developments between the US and its key partners, and growing political uncertainty in Japan after the ruling party lost the upper house elections.

BOJ Holds Steady

As widely expected, the Bank of Japan left its current monetary policy tools unchanged on Thursday, maintaining the interest rate range at 0.50% the highest since 2008 for the fourth consecutive meeting.

The decision to hold rates steady was unanimous among the board members. Policymakers indicated they prefer to take more time to evaluate the impact of growing global economic risks, including rising US tariffs, on Japans fragile recovery.

Monetary Policy Statement

In its policy update, the BOJ reiterated its willingness to raise interest rates if economic and price conditions evolve as projected.

The economic outlook remains surrounded by multiple risks, the BOJ said. In particular, how trade and other policies develop in each region and how global economic activity and prices respond remains highly uncertain.

Inflation Forecasts

The BOJ raised its core CPI forecast for fiscal year 2025 from 2.2% to 2.7%, the 2026 projection from 1.8% to 1.7% (revised downward), and the 2027 estimate from 1.9% to 2.0%.

Rate Outlook

Market pricing now reflects over a 50% chance of a 25-basis-point rate hike at the BOJs September meeting.

Investors are awaiting further data on inflation, unemployment, and wage growth in Japan to recalibrate expectations.

Kazuo Ueda Speech Expected

BOJ Governor Kazuo Ueda is scheduled to speak later today to discuss the policy meeting results. His comments are expected to provide further insight into the timing and pace of future rate normalization and potential rate hikes through the remainder of the year.