After the Federal Reserve's hawkish rate hike, the yen plunged, with the market focusing on whether the Bank of Japan can release a stronger hawkish signal.

BlockBeats news, September 17: After the Federal Reserve raised interest rates and signaled further policy tightening, the yen came under renewed pressure, with the USD/JPY pair once rising to 156.42, and the yen falling more than 1% overnight. The market has now almost fully priced in a 25 basis point rate hike by the Bank of Japan this Friday, so the focus has shifted from "whether to hike" to whether Kazuo Ueda can signal a more hawkish follow-up policy stance.

Analysts pointed out that after the Federal Reserve raised rates, the U.S.-Japan interest rate differential widened again, and even if the Bank of Japan hikes rates by 25 basis points this week, the yen may still face pressure. If the Bank of Japan's policy signal is weaker than market expectations, USD/JPY may rise further toward 158 or even around 160.

Another pressure the Bank of Japan has recently faced comes from inflation and oil prices. Some analysts believe that a weaker yen and rising oil prices may strengthen the case for the Bank of Japan to continue tightening policy, but this rate hike may have already pushed the policy rate into a range close to neutral, and the Bank of Japan may not necessarily signal a 50 basis point hike or consecutive rate increases.

At the same time, the risk of exchange rate intervention by the Japanese government may limit the yen's decline. The market will also watch whether the Bank of Japan emphasizes the pace of future rate hikes, and whether the U.S. interest rate trajectory can continue to widen the U.S.-Japan interest rate differential.