The yen consolidates against other G-10 and Asian currencies but may be buoyed by prospects of a Bank of Japan rate increase, according to market observers. The Japanese currency held steady in early trading as investors assessed the likelihood of further monetary tightening.

Carol Kong, economist and currency strategist at Commonwealth Bank of Australia, highlighted a media report indicating the "Takaichi government is supportive of a near-term interest-rate hike by the Bank of Japan." Kong noted that Prime Minister Takaichi's well-known preference for lower interest rates has been widely considered a constraint on the pace of BoJ rate hikes.

Despite this political backdrop, the market is currently pricing about a 70% chance of a 25bps BOJ rate hike at the September meeting, Kong added. This probability suggests growing confidence among traders that the central bank will act soon.

In early trade, the dollar was little changed at 159.48 yen and the euro was flat at 183.96 yen, FactSet data show. The stable crosses reflect a wait-and-see attitude ahead of key policy signals.