Influences on the Japanese Yen

The value of the Japanese Yen is mainly shaped by Japan’s economy and the policies of the Bank of Japan (BoJ). From 2013 to 2024, the very loose monetary policy weakened the Yen. The difference in bond yields between Japan and the U.S. also affects the Yen’s strength. Moreover, because the Yen is seen as a safe haven, its value usually rises during times of market turmoil. On November 12, 2025, the promising outlook for the AUD/JPY currency pair is important to note. This pair is holding steady around the 100.90 mark, mainly due to differences in economic policies between Australia and Japan. Recent Australian Consumer Price Index (CPI) data for the third quarter showed a surprising rise to 3.8%, increasing pressure on the Reserve Bank of Australia to keep its strict policy into 2026. In contrast, the Japanese Yen appears weak. The Bank of Japan kept interest rates unchanged during its late October meeting, and the preliminary GDP figures for Q3 revealed a slight contraction of 0.1%. This gives officials little incentive to raise rates. The growing differences in policy make the higher-yielding Australian Dollar an appealing choice compared to the low-yielding Yen.

Trading Strategy for Derivatives

For those trading derivatives, buying call options could be a smart way to benefit from the expected rise of the Yen. Contracts for December 2025 or January 2026 with strike prices above immediate resistance, such as 101.50 or even 102.00, might be worth considering. The goal is to take advantage of a possible rally towards the highs seen in late 2024. However, it’s important to manage risks, as Japanese officials often intervene to support the Yen verbally. If the Yen falls below the 100.00 mark, it could indicate a shift in momentum and challenge our optimistic view. Traders might look into purchasing inexpensive, out-of-the-money put options with a 99.00 strike to hedge against any sudden downturn. This strategy works best in a current “risk-on” climate, where global equity markets are stable. Remember, during market stress—like what happened with regional banks in 2023—the Yen generally strengthens as a safe haven. A sudden increase in market volatility could quickly jeopardize this trade, so it’s crucial to monitor overall risk sentiment. Create your live VT Markets account and start trading now.

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