The USD/JPY pair rose to about 153.70 during the early Asian session on Monday. This increase happened as the Japanese Yen weakened due to uncertainty about the Bank of Japan’s (BoJ) interest rate decisions. Japan’s new Prime Minister, Sanae Takaichi, plans to introduce an economic stimulus package worth $65 billion by late November. Although the central bank is hesitant to raise rates further, some members think now might be the right time to do so. Minutes from the BoJ’s September meeting revealed that two members advocated for an immediate rate hike. They noted that the 2% price stability target is nearly achieved. In contrast, U.S. consumer sentiment has fallen to its lowest level since June 2022. The UoM Consumer Sentiment Index dropped to 50.3 in November, down from 53.6 in October and below the expected 53.2.

Influence Of BoJ Policies

The Japanese Yen is affected by various factors, including BoJ policies and the yield differences between Japanese and U.S. bonds. Though the Yen is usually considered a safe haven, recent BoJ policy shifts could enhance its value. Historically, the Yen’s strength has been shaped by the BoJ’s ultra-loose monetary policy, which is now being slowly adjusted. As USD/JPY hovers near 153.70, we approach crucial levels not seen since late 2024. The market is currently uncertain about the BoJ’s next moves while also recognizing signs of a slowing U.S. economy. This uncertainty hints at a possible end to the current range-trading phase, likely leading to a significant price movement. In Japan, there is increasing pressure on the BoJ to implement another rate increase. The recent Tokyo Core CPI data for October 2025 showed a rate of 2.9%, remaining stubbornly above the central bank’s 2% target and increasing speculation of a potential move before the year ends. Since the BoJ ended its negative interest rate policy in March 2024, traders have been waiting for a more decisive action.

U.S. Dollar Under Pressure

On the other hand, the U.S. dollar is struggling due to weak economic data, making it tough for it to gain sustained strength. The drop in the University of Michigan Consumer Sentiment Index to 50.3 is compounded by last week’s Non-Farm Payroll report, which reported a meager gain of only 95,000 jobs. The ongoing government shutdown is clearly affecting both consumer and business confidence. Given these mixed signals, preparing for a sharp move in either direction seems wise in the upcoming weeks. One-month implied volatility on USD/JPY options has exceeded 14%, indicating the market expects a breakout. Traders in derivatives should think about strategies that benefit from this increased volatility, like long straddles, instead of betting on a specific direction. Create your live VT Markets account and start trading now.

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