Japanese yen remains strong after positive GDP data, leading to higher yields and currency appreciation
by VT Markets
/
Aug 15, 2025
Japan’s preliminary GDP for Q2 showed a growth of +0.3% compared to the previous quarter, which is better than the expected +0.1%. This growth marks the fifth straight quarter of GDP increases for Japan.
A stronger GDP influences the Bank of Japan’s decisions, which could lead to higher interest rates and a stronger yen. As a result, the yen gained value, with the USD/JPY rate dropping from early highs above 147.80 to about 147.60.
Impact of Stronger GDP
The GDP growth of +0.3% in the second quarter gives the Bank of Japan more reason to adjust its policies. This marks the fifth consecutive quarter of growth and supports a shift away from ultra-easy monetary policies. We expect the market to now factor in a higher chance of another rate hike before the end of the year.
This recent data adds to a strong inflation situation. The nationwide core CPI for July reached 2.1%, keeping inflation above the BoJ’s target of 2% for most of the past two years. With ongoing economic growth and consistent inflation pressures, the central bank may find it hard to postpone further actions.
For derivative traders, this is a chance to position for a stronger yen. We recall the BoJ’s significant shift away from negative rates in March 2024, showing their willingness to act. After seeing USD/JPY reaching as high as 160 last year, a major correction could happen if the popular carry trade starts to unwind.
Currency Volatility Ahead
In the upcoming weeks, we expect more currency fluctuations as we approach the September BoJ meeting. Traders should think about buying USD/JPY put options or creating put spreads to prepare for a potential decrease with limited risk. A break below 148.00 is an important technical signal, and we will be monitoring for a possible test of the 145 level.
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by VT Markets
Aug 15, 2025
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