Yen Hits 6-Month High: Japan Expected to Raise Rates Next Week

WHAT HAPPENED

The yen strengthened to around 154 per dollar, its highest level in six months. Markets see a 98% probability that the Bank of Japan will raise its rate by 0.25 points, to 1.25%, on September 17 and 18.

WHY IT MATTERS

Japanese wages rose 4.7% in July and real wages 2.4%; additionally, second-quarter GDP grew by 1.4%. Higher incomes and a strong economy provide room to raise rates. This could strengthen the yen, make exports more expensive, and lower the cost of imported gasoline and raw materials.

AND FOR YOUR PORTFOLIO

For those traveling to Japan, pesos and dollars buy fewer yen than they did a few weeks ago. In investments, a strong yen can reduce the value of converting the profits of Japanese exporters of cars, electronics, and chips into yen, even if their sales do not change.