The Japanese Yen is weakening as Prime Minister Takaichi encourages a monetary policy that supports economic recovery. This dovish approach from the Bank of Japan (BoJ), along with hopes for a US government shutdown resolution, has reduced demand for safe-haven assets. Currently, USD/JPY is trading at about 154.85, showing a 0.50% increase. Takaichi believes that inflation should come from wage increases rather than rising food prices. The BoJ might delay raising interest rates past December. Japan’s government plans to introduce an economic stimulus package, which is expected to encourage the BoJ to keep its supportive stance. These factors have led to a weaker Yen, as global sentiment shifts towards riskier assets.

US Economic Outlook

In the US, there are expectations for a rate cut from the Federal Reserve due to worsening labor market conditions. The ADP report shows that private employment has lost an average of 11,250 jobs weekly. This limits the US Dollar’s potential for growth, even though it has risen in the short term. No major US economic data is expected on Wednesday, so attention will turn to speeches from the Federal Open Market Committee for insights into future Fed policy. The USD is currently the strongest against the JPY, as shown in today’s currency performance. The USD/JPY pair is approaching 155 as the BoJ continues its supportive approach, putting pressure on the yen. Meanwhile, expectations for a Federal Reserve rate cut in December limit the strength of the US Dollar. This creates a mixed market situation where both currencies may face challenges.

Japan’s Economic Strategy

Japan’s focus is on an upcoming stimulus package, set to be announced on November 21st, which will likely prevent the central bank from raising rates soon. Recent data supports this cautious stance, showing Japan’s national core CPI for October 2025 at 2.1%. This indicates that inflation is easing while wage growth is slow, suggesting little policy support for the yen in the near future. In the US, the argument for a December rate cut is gaining strength after the October 2025 jobs report showed Non-Farm Payrolls averaging only 95,000 in the past three months. With inflation dropping to 2.5% in the latest CPI report, the Fed has more flexibility to ease policy and support a slowing economy. This outlook may limit significant gains for the US Dollar. Given these opposing influences, traders might expect increased volatility rather than a clear market trend. Strategies using options that benefit from large price fluctuations, regardless of direction, could be more effective than simple buying or selling. This approach helps manage risks related to sudden policy changes by either central bank. It’s also important to consider the risk of intervention from Japanese authorities, especially as the yen weakens beyond the 155 mark. We recall sharp reversals in late 2022 when authorities intervened to strengthen the yen around these levels. The potential for intervention adds risk to holding long USD/JPY positions and strengthens the case for using options to define risk. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now