Corporate leaders across Japan are now pushing for a stronger yen, with even those traditionally benefiting from a weaker currency joining the chorus of concern. Data from the Bank of Japan's July quarterly Tankan survey reveals that Japanese companies anticipate an average exchange rate of 152.51 yen per dollar for the second half of this year. Despite the yen's rapid appreciation over the past two weeks, it remains historically weak, with Macrotrends data showing the average dollar-yen rate over the past decade at approximately 123 yen per dollar. As of Thursday, the currency traded at 156.3 yen per dollar.

Yoshihide Kanahana, Chairman of Kawasaki Heavy Industries, voiced his frustration in a Tuesday interview, stating that when exchange rates fluctuate, "we cannot formulate strategies," calling this the company's "biggest issue." He added that if the yen strengthened to 150 per dollar, he might consider relocating manufacturing operations from the United States back to Japan. According to a report released by the company last year, Kawasaki Heavy Industries operates 27 production bases overseas, including in the U.S., alongside 17 domestic facilities in Japan.

Takayuki Ueda, President and CEO of Japanese energy giant Inpex Corporation, is pushing for an even stronger yen, suggesting that a level of 100 yen per dollar would be "appropriate" given the state of Japan's economy. While Inpex saw first-half revenues decline year-on-year due to reduced crude oil sales, the company noted in its financial report that the yen's 6.7% depreciation to 158.37 per dollar helped cushion some of the revenue drop. Despite the fact that nearly 90% of this Japanese oil company's business is conducted overseas and transacted in dollars—meaning it actually benefits from a weaker yen—Ueda remains firm in his stance. "If we look at it from the perspective of the entire Japanese economy, the current exchange rate level may be too weak," he said.

Takeshi Hashimoto, Chairman of Japanese shipping giant Mitsui O.S.K. Lines, expressed his desire for foreign exchange stability in an interview last week, noting that a dollar-yen range of 150 to 155 would put him "at ease." Although Mitsui O.S.K. Lines also generates revenue primarily in dollars and benefits from yen weakness, Hashimoto acknowledged concerns that persistent yen depreciation "could create chaotic conditions in the financial markets."

Investors anticipate that the Bank of Japan will raise its policy rate by 25 basis points to 1.25% at the conclusion of its two-day meeting on Friday. However, the Federal Reserve's first rate cut since 2023 on Wednesday, coupled with expectations of further easing, has led traders to price in three additional cuts by mid-next year. This could maintain a wide interest rate differential between the U.S. and Japan, and even with the market fully pricing in Friday's BOJ hike, the yen may continue to weaken unless officials can convince markets that further tightening lies ahead.

Investors will scrutinize Governor Kazuo Ueda's press conference following the rate decision for clues on the pace and scope of future tightening. Rinto Maruyama, Senior Rates and FX Strategist at SMBC Nikko Securities, suggests that a renewal of yen weakness gives the BOJ greater reason to emphasize upside risks to inflation, with rising oil prices potentially providing policymakers justification for further tightening. Maruyama noted that Friday's expected rate hike would place Japan's policy rate within the estimated neutral range, making it unlikely officials will signal a 50-basis-point move or consecutive increases. If the meeting is perceived as dovish, he identified 158 as the next upside target for dollar-yen, implying the yen becomes vulnerable if investors conclude the BOJ's tightening cycle cannot keep pace with the Fed. Maruyama believes that over time, if U.S. rates rise faster than Japan's, dollar-yen could gradually climb back toward 160.

Matthew Ryan, Head of Market Strategy at Ebury, expects the BOJ to hike and deliver hawkish rhetoric. "The BOJ faces extremely high stakes, effectively endorsing quarterly rate hikes going forward," he said.