Markets eye Bank of Japan meeting on Friday as yen repeats 40-year US dollar lows

Japan’s central bank is in focus this week as its next interest-rate meeting comes amid new 40-year yen lows against the US dollar.Key points: The Japanese yen is approaching new 40-year lows against the US dollar, nearly beating its latest record from last week.The Bank of Japan will decide on interest-rate changes on July 31, with rates already at 1%, their highest since September 1995.Analysts have been warning that the yen carry trade could unwind again, repeating a major crypto headwind from 2024.Dollar-yen seeks to reclaim 40-year recordData from TradingView showed USD/JPY approaching 164 on Tuesday, just a fraction below new 40-year highs seen last week.USD/JPY 12-month chart. Source: Cointelegraph/TradingViewThe yen’s status as a funding currency is making BoJ monetary policy have an outsized influence on global markets. Japan’s currency markets are characterized by minimal capital controls and unmatched liquidity among non-dollar currencies. Japan’s persistent current account and trade surpluses in earlier decades along with systemically low interest rates have made JPY the most important global funding currency. However, since Japanese inflation picked up in 2022, this ha...