Last updated: September 15, 2026. Editorial Team — researched using reporting from Trading Economics and J.P. Morgan Global Research. See “Sources & Methodology” for our full source list.

Quick Answer

Two of the world’s most consequential central banks are on a genuine collision course this week: the Federal Reserve, widely expected to raise rates for the first time since 2023 on Wednesday, and the Bank of Japan, expected to lift its own policy rate to 1.25% — its highest level in roughly 31 years — in a decision expected shortly after. The yen has already been trading near its strongest level in seven months, around 153.4 per dollar, as markets price in that more aggressive BOJ tightening alongside continued unwinding of yen-funded carry trades and increased capital repatriation back to Japan.

The BOJ’s Side of the Story

Trading Economics’ currency tracking shows the yen holding near 153.4 per dollar, close to its strongest level in seven months, specifically ahead of the expected Bank of Japan rate decision. The central bank is widely expected to lift its policy rate to 1.25%, which would mark its highest level in roughly 31 years, following an earlier rate increase in June. The stated rationale, per Trading Economics’ reporting, centers on the BOJ addressing the risk of inflation exceeding expectations amid rising crude oil prices and continued yen weakness — a genuinely similar inflationary pressure point to what’s driving the Fed’s own expected hike this week, despite the two central banks operating in very different domestic economic contexts.

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The Yen’s Gains Are Real, But More Modest Than They Might Appear

Trading Economics’ reporting adds an important nuance for interpreting the yen’s recent strength: the currency is up more than 3% so far this month, supported by expectations for more aggressive BOJ policy tightening, the unwinding of carry trades, and increased capital repatriation. That’s a genuinely meaningful monthly move for a major currency. J.P. Morgan Global Research’s analysis, however, adds a specific data point suggesting some caution about overstating the shift: while the yen has appreciated against most other G-10 currencies in recent weeks, its gains have been limited to just 0.1% versus the dollar specifically and 0.5% on a trade-weighted basis over a comparable period — genuinely modest given that a Ministry of Finance yen-buying intervention on the order of JPY 8-9 trillion is believed to have occurred over that same window. J.P. Morgan’s read on why the intervention produced such a limited currency reaction: yen short positions likely weren’t particularly built up beforehand, and the intervention itself may have already been anticipated by markets in advance, reducing its surprise impact.

J.P. Morgan’s Broader Dollar and Yen Outlook

J.P. Morgan Global Research has separately upgraded its outlook for the US dollar overall, citing the hawkish Fed repricing discussed in our companion coverage of this week’s FOMC meeting, alongside a resilient US labor market. Despite the yen’s recent strength specifically around the BOJ decision, J.P. Morgan’s research maintains a bearish view on the yen over a longer horizon, keeping its USD/JPY targets unchanged at 158 for the second quarter, 160 for the third quarter, and 164 for the fourth quarter of the outlook period covered in the research — suggesting the firm views this week’s yen strength as a shorter-term reaction to the specific rate decision, rather than a durable reversal of the yen’s broader multi-year weakening trend against the dollar.

Why Two Rate Hikes in the Same Week Matters

Having both the world’s largest economy (the US) and third-largest economy (Japan) potentially raising rates within days of each other carries genuine significance beyond either country’s domestic bond and equity markets individually. Synchronized tightening among major central banks tends to compound its effect on global financial conditions more than either move would in isolation — capital flows, corporate borrowing costs, and currency positioning across virtually every other economy get influenced by the relative direction of the world’s two most heavily-traded currencies moving together, rather than offsetting each other. For carry-trade strategies specifically — which typically involve borrowing in low-yielding yen to invest in higher-yielding dollar assets — a BOJ hike that narrows the interest-rate gap with the US, even as the Fed also hikes, adds a genuinely complex, two-sided pressure on positioning that differs meaningfully from a scenario where only one central bank is moving.

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The Euro and Pound Backdrop

J.P. Morgan’s broader currency forecast, cited in the same research, projects EUR/USD reaching 1.15 in September 2026 specifically, declining further to 1.14 by December and 1.13 by March 2027, reflecting a bearish euro outlook the firm attributes to widening growth divergence between the EU and the US. GBP/USD is separately forecast at 1.31 for September, 1.28 for December, and 1.30 by March 2027, with the firm citing growing political uncertainty in the UK as a source of downward pressure on sterling, though one it expects to remain relatively contained rather than triggering a sharper decline.

What This Means for the Week Ahead

• Two major rate decisions in close succession: The Fed’s decision Wednesday and the BOJ’s expected hike shortly after both carry the potential to move global currency, bond, and equity markets independently and in combination.
• Carry-trade unwinding remains a live risk: Continued BOJ tightening narrowing the yield gap with the US could accelerate further unwinding of yen-funded carry positions, a dynamic that has historically produced outsized, fast-moving currency swings when it occurs at scale.
• The yen’s recent strength may prove temporary: J.P. Morgan’s longer-term bearish USD/JPY targets suggest this week’s yen gains are being read by at least one major research desk as a shorter-term reaction rather than a durable trend reversal.

Frequently Asked Questions

Is the Bank of Japan expected to raise rates this week?

Yes, the BOJ is widely expected to lift its policy rate to 1.25%, which would be its highest level in roughly 31 years, in a decision expected shortly after the Federal Reserve’s own meeting concludes.

Why has the yen been strengthening?

The yen has traded near its strongest level in seven months, supported by expectations of BOJ tightening, unwinding of yen-funded carry trades, increased capital repatriation to Japan, and a reported Ministry of Finance intervention.

Will the yen’s strength last?

J.P. Morgan Global Research maintains a longer-term bearish outlook on the yen despite its recent gains, keeping USD/JPY targets at 158-164 through early 2027, suggesting the firm views current strength as more temporary than a lasting trend reversal.

Why does it matter that the Fed and BOJ might both raise rates in the same week?

Synchronized tightening among major central banks tends to compound effects on global financial conditions, capital flows, and currency positioning more significantly than either move would in isolation.

Sources & Methodology

This article draws on data and analysis from: Trading Economics’ real-time Japanese yen currency tracking and Bank of Japan policy coverage; and J.P. Morgan Global Research’s currency volatility analysis, including forecasts for the US dollar, euro, British pound, and Japanese yen. Figures reflect the most recently published data as of this article’s last-updated date and are subject to change with each central bank’s actual policy announcement.

This article is for informational purposes and does not constitute financial or investment advice.