BOJ Governor Ueda stated that policy decisions will not depend only on new inflation forecasts. He highlighted the need to review upcoming data without any biases. Ueda noted that the impacts of tariffs are becoming evident, but the timing is still unclear. He assured that suitable decisions will be made at each meeting, considering risks and trends in underlying inflation. Ueda said that underlying inflation is slowly increasing and is not currently affected by tariffs. He avoided making any firm promises about future policy changes. Although he acknowledged improvements in trade, Ueda remained cautious about discussing interest rate hikes. In the currency market, the USD/JPY decreased by 0.4% for the day, trading at 148.87 after testing its 200-day moving average of 149.50.

Anticipated Interest Rate Moves

The Bank of Japan seems to be hinting at another interest rate increase, even while remaining vague. Their attention on underlying inflation suggests they are looking beyond temporary data fluctuations. Traders should prepare for a stronger yen in the weeks to come. This perspective is supported by recent data showing Japan’s core inflation for July 2025 reached 2.7%, surpassing expectations. We also received results from the spring “shunto” wage negotiations, which secured an average pay increase of over 4.5%, the highest in decades. These figures give the BOJ the justification it needs for another policy adjustment. Looking at USD/JPY, we notice similarities to late 2023 when the pair struggled near the 149-150 level before verbal intervention began. The current price action below 149.00 indicates that the market is already anticipating a more hawkish BOJ. We expect further tests of key support levels as speculation about rate hikes builds.

Trading Strategies for Yen Appreciation

For derivative traders, this suggests it’s time to consider buying JPY call options or USD/JPY put options to bet on further yen appreciation. Given the BOJ’s meeting-by-meeting strategy, implied volatility is expected to increase ahead of their next decision in September. Strategies that benefit from this rise in volatility could also be profitable. It’s worth noting that the BOJ ended its negative interest rate policy in March 2024, marking its first hike in 17 years. The governor’s current language indicates that we are now entering the next phase of policy normalization. This isn’t just a one-time adjustment but a gradual shift that will continue to support the yen. Create your live VT Markets account and start trading now.

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