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    The Japanese yen weakens against the US dollar as USD/JPY nears 158.50 before a rate decision

    by VT Markets
    /
    Jan 23, 2026

    Yen Weakens Due to Lower Inflation

    The Japanese Yen has fallen against the US Dollar after recent inflation numbers showed a decline. Lower inflation may lessen the chances of the Bank of Japan (BoJ) raising interest rates. The BoJ is likely to keep its policy rate at around 0.75%, following an increase to a three-decade high in December 2025. How the BoJ handles currency control is crucial for the Yen’s value. Their previous policy of extremely low interest rates contributed to the Yen losing value. However, a gradual move away from this strategy has recently strengthened the Yen. Often seen as a safe-haven currency, the Yen tends to gain value during times of market stress. Currently, USD/JPY is trading close to 158.45, reacting to the BoJ’s decision to maintain its policy rate at 0.75%. This was largely anticipated, especially after last week’s figures showed Japan’s national inflation for December 2025 slowed to 2.1%, the lowest since March 2022. The BoJ’s choice to stay put, despite Chairman Ueda’s cautious remarks in a press conference, keeps the Yen under pressure.

    US Economic Strength and Risk of Currency Intervention

    The differences in policies between Japan and the United States are driving this currency pair. Recent US data revealed that core inflation for December 2025 remained steady at 3.9%, and the latest non-farm payroll report showed a strong addition of 216,000 jobs, exceeding expectations. This ongoing strength in the US economy indicates that the Federal Reserve is unlikely to lower rates soon, which boosts the dollar. This creates a challenging environment, pushing the pair into levels not seen in decades. We should note the Ministry of Finance’s actions from late 2022, when they stepped in to strengthen the Yen as the dollar approached 152. With current levels exceeding 158, the risk of government intervention is very high, making long positions on USD/JPY very risky. Create your live VT Markets account and start trading now.

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