The Japanese yen briefly strengthened by more than JPY3 ($0.01) against the US dollar in New York trading on September 3, driven by expectations that the Bank of Japan will raise interest rates in mid-September, Kyodo News reported on September 4.

The move points to a shift in the interest rate gap that has weighed on the yen for years, with traders now positioning for a narrowing differential between Japan and the United States as the Federal Reserve holds fire and the BOJ edges towards tightening.

At 5 p.m. in New York, the dollar fetched 155.75-85 yen, down JPY2.89 from the previous day. The US currency had traded at 157.03-06 yen at 5 p.m. in Tokyo the same day.

Many market participants said they did not believe the Japanese government had intervened in the foreign exchange market during New York trading, attributing the appreciation instead to speculation that the rate gap between the two countries would soon shrink.

The yen's advance followed comments by US Treasury Secretary Scott Bessent, who called for a review of accommodative monetary conditions at a press conference after a two-day meeting of Group of 20 finance ministers and central bank governors that ended on September 1.

BOJ Governor Kazuo Ueda has said the central bank is prepared to lift interest rates in line with economic and price developments. At the same time, a growing number of market participants expect the Federal Reserve to keep its policy rate on hold for some time as inflationary pressure eases.