The Japanese Yen (JPY) increased by 0.5% against the US Dollar (USD), pushing the USD/JPY to the key level of 155. This movement followed the Q4 Tankan business survey results. Current technical indicators show a bearish trend, with the RSI falling below 50. Now, all eyes are on the Bank of Japan’s (BoJ) upcoming policy decision, which is expected to include a 25 basis point increase to 0.75%. There may also be changes to growth and inflation forecasts. The adjustment in USD/JPY highlights the key 155 level, with attention now on the 50-day moving average at 154.15.

Anticipation of BoJ Policy Decision

Japan will release preliminary PMI data for December soon, but the main focus is on the expected BoJ policy decision later this week. Media reports suggest a good chance of revising growth and inflation forecasts, along with a more hawkish stance. There might also be changes to the long-term range of Japanese Government Bond yields. The JPY is strengthening, bringing the USD/JPY pair down to the significant 155 level. This movement follows the Tankan business survey meeting expectations, indicating traders expected a weaker result. Attention is now on the Bank of Japan’s policy decision coming up this week. Traders are betting on a further drop by purchasing USD/JPY put options. With the 50-day moving average at 154.15 as the next target, put options with strike prices around 154.00 or 153.50 that expire in late December or January are becoming popular. This strategy will be profitable if the Bank of Japan delivers the hawkish policy that the market expects.

Inflation and Market Strategies

This positive sentiment is backed by Japan’s persistent inflation, with the national core CPI for November 2025 remaining at 2.9%, which is above the central bank’s target. In contrast, recent inflation data from the US has been showing moderation, with core PCE figures at 2.5%. This growing policy divergence—a hawkish BoJ and a neutral Fed—supports a stronger yen. Implied volatility for yen options is rising ahead of the meeting due to the market’s memory of previous surprises. For example, in December 2022, the BoJ unexpectedly adjusted its yield curve control policy, leading to a sharp JPY rally that caught many traders off guard. This time, traders are expecting significant movement and are reluctant to short the yen. Given the high expectations for a 0.25% rate hike to 0.75%, the biggest risk is a “dovish” hold or a less aggressive statement from the central bank. If this happens, it could lead to a sharp reversal, pushing USD/JPY back above 156 and reducing the value of recently bought puts. This situation makes setting up risk-defined strategies, like put spreads, a smart choice for some traders. Create your live VT Markets account and start trading now.

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