No Expected Policy Change

The Bank of Japan (BoJ) is not expected to change its policy soon, but some tightening might happen in December or January. Treasury Secretary Bessent has encouraged Japan’s government to allow the BoJ to tackle inflation through stricter policies. Technical analysis indicates a potential drop for USD/JPY, with a double top in the low-153s suggesting a move below 146. Market observers are closely monitoring these events for possible effects on currency performance. The FXStreet Insights Team includes journalists who collect market observations and share insights from commercial and internal analysts. Legal disclaimers emphasize that this content is for informational purposes and that investments carry risks. Readers should conduct their own research.

Policy Shift on the Horizon

The Japanese Yen is currently weak, but a significant policy shift may be coming soon. The fundamentals suggest that the Bank of Japan (BoJ) will tighten policy for the first time in this cycle, likely in December or January. This JPY weakness could be a good opportunity for positioning. For over two years, core inflation has stayed above the BoJ’s target of 2%, recently reaching 2.7% in September 2025. Additionally, the latest Tankan survey shows that major corporations plan to raise wages by more than 5.5%, the highest increase in 30 years. This domestic pressure makes a rate hike almost certain. In contrast, the Federal Reserve has already cut rates by 75 basis points this year to support a slowing U.S. economy. This growing gap between a tightening BoJ and a loosening Fed strengthens the case for a stronger yen. The interest rate advantage that has favored the dollar is narrowing. Given this outlook, we should consider buying put options on USD/JPY, targeting strikes below 146. Implied volatility is still relatively low, suggesting these options do not yet reflect the full impact of a potential policy change by the BoJ. This strategy allows us to prepare for a significant drop while keeping our initial risk limited. We should also remember the sharp interventions in late 2022 and 2024 when the pair surpassed 150. A hawkish change in BoJ policy would likely create a more sustained boost for the yen than past interventions. The chance for a rapid decline in value is very real. Create your live VT Markets account and start trading now.

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