Since the dollar fell from around 160 levels against the yen at the beginning of last week, the cumulative decline in the pair has been close to 4%, which indicates that traders are closing short and arbitrage positions in yen. The main reason behind the rise in the yen exchange rate is that the market is increasingly estimating that the Bank of Japan will raise interest rates at the September 17-18 interest rate meeting. Another major stimulus for Tuesday was that morning data showed that Japan's second-quarter economic growth rate was better than expected: Japan's second-quarter GDP annualized growth rate of 1.4%, higher than the initial value of 1.1%, and the decline in corporate capital expenditure was less than previously announced. Meanwhile, real wages rose 2.4% year on year in July. This series of data further confirms that the Japanese economy is capable of withstanding higher borrowing costs. This further strengthens market expectations, and it is believed that the Bank of Japan may speed up the pace of monetary tightening. Currently, the market is almost completely priced. The Bank of Japan will raise interest rates by 25 basis points to 1.25% in September. Even Japanese Prime Minister Takaichi Sanae's economic adviser Takuji Aida has publicly predicted interest rate hikes in September and is expected to continue to raise interest rates in the future. This has pushed market expectations to a further hawkish shift.

Since the dollar fell from around 160 levels against the yen at the beginning of last week, the cumulative decline in the pair has been close to 4%, which indicates that traders are closing short and arbitrage positions in yen. The main reason behind the rise in the yen exchange rate is that the market is increasingly estimating that the Bank of Japan will raise interest rates at the September 17-18 interest rate meeting. Another major stimulus for Tuesday was that morning data showed that Japan's second-quarter economic growth rate was better than expected: Japan's second-quarter GDP annualized growth rate of 1.4%, higher than the initial value of 1.1%, and the decline in corporate capital expenditure was less than previously announced. Meanwhile, real wages rose 2.4% year on year in July. This series of data further confirms that the Japanese economy is capable of withstanding higher borrowing costs. This further strengthens market expectations, and it is believed that the Bank of Japan may speed up the pace of monetary tightening. Currently, the market is almost completely priced. The Bank of Japan will raise interest rates by 25 basis points to 1.25% in September. Even Japanese Prime Minister Takaichi Sanae's economic adviser Takuji Aida has publicly predicted interest rate hikes in September and is expected to continue to raise interest rates in the future. This has pushed market expectations to a further hawkish shift.