Bank of Japan Meeting Minutes

The US Dollar is bouncing back against the Japanese Yen, rising towards 154.00 after recently dipping below 152.00. This recovery is cautious as investors are worried and are closely watching upcoming US employment and services data. The minutes from the Bank of Japan’s October meeting show they are careful about raising interest rates due to potential economic risks related to US tariffs. Japan’s top FX official mentioned that the Yen’s recent behavior is not aligned with economic fundamentals, resembling past situations that prompted BoJ interventions. Market caution is high, and expectations for further Fed monetary easing in December are fading. The US government shutdown is now into its fifth week, and it could become the longest in history, increasing pressure on the markets.

US Employment and Services Data

The US Dollar Index remains close to three-month highs as the market awaits the October ADP Employment Report. Analysts expect a 25,000 increase in private jobs after a drop in September. The US ISM Services PMI is also predicted to show a slight rise in October. The Bank of Japan’s low interest rate policy, in place since 2013 and modified in 2024, has influenced the Yen’s value against other currencies. Technical analysis indicates that USD/JPY is strong while above 153.00, but it encounters resistance around 154.50 and 154.85. Currently, USD/JPY is near 154.00, a key point where opposing trends collide. A strong dollar, driven by risk aversion from the ongoing US government shutdown, is facing the risk of Japanese intervention. The cautious tone in the Bank of Japan’s meeting minutes indicates their reluctance to increase rates, which naturally weakens the yen. The main risk for long dollar positions is possible intervention from Japanese officials. This happened in 2022 when the pair crossed 151.90 and again in early 2024, making these levels highly sensitive. Recent warnings from Japan’s top currency diplomat may signal imminent intervention. Recent data shows the US economy is still strong, likely preventing the Federal Reserve from considering rate cuts. The October ADP Employment Report recorded a gain of 45,000 jobs, surpassing the low expectation of 25,000. Alongside the ISM Services PMI read of 51.2, this reinforces the policy gap that has been boosting the dollar throughout the year. On the other hand, Japan’s national Core CPI for September, released on October 18, 2025, was 2.7%. This ongoing inflation, well above the Bank of Japan’s 2% target, puts them in a tough spot. Their reluctance to tighten policy is primarily causing yen weakness, but each month of high inflation makes this stance harder to justify. Given the current tension, strategies that take advantage of sharp increases in volatility should be considered. Buying out-of-the-money puts on USD/JPY offers a cost-effective way to protect against a sudden drop if the Bank of Japan intervenes. Implied volatility is rising, and a straddle could also be used to profit from significant moves in either direction. Alternatively, for those who expect US economic strength to push the pair higher, a bull call spread is a smart move. This strategy would allow profits if the pair rises towards 155.00 while also managing risks and limiting losses in case of an intervention. It’s wise to avoid holding large, unhedged long positions until the threat of official selling decreases. Create your live VT Markets account and start trading now.

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