Japan’s Economics Minister Minoru Kiuchi mentioned that a weak Yen could increase the Consumer Price Index (CPI) due to higher import costs. Japan’s Finance Minister Satsuki Katayama also confirmed that the upcoming economic stimulus aligns with Prime Minister Sanae Takaichi’s active fiscal plan. The USD/JPY exchange rate rose by 0.04%, now trading at 154.60. The value of the Japanese Yen is heavily influenced by the Bank of Japan’s policies, differences in bond yields, and trader sentiment.

Role Of The Bank Of Japan

The Bank of Japan is crucial in determining the Yen’s value, partly through currency interventions. From 2013 to 2024, its very loose monetary policy contributed to the Yen losing value against other currencies. Differences in bond yields between Japan and the US have historically impacted the Yen. The Bank of Japan’s shift away from its loose policy, along with interest rate cuts from other major banks, has started to narrow the yield differences. The Japanese Yen is known as a safe-haven currency. In unstable market conditions, it is often preferred for its stability, which might lead to a stronger Yen compared to riskier currencies. Given the Yen’s weakness, comments about rising import costs are reflected in the data. The latest national Consumer Price Index (CPI) for October 2025 showed a 3.1% increase compared to last year, remaining stubbornly above the Bank of Japan’s 2% target. This situation puts the central bank in a tough spot as it considers tightening policies.

Exchange Rate Considerations

The USD/JPY exchange rate at 154.60 is an important level that traders should watch closely. Recall that Japanese authorities stepped in to strengthen the Yen when it dropped below 152 in April 2024. The possibility of another sudden intervention to support the currency is now quite high. This weakness stems mainly from the significant difference in interest rates between Japan and other major economies. While the Bank of Japan has slowly raised its policy rate to 0.10%, the US Federal Reserve’s key rate remains much higher at 4.5%. This encourages traders to sell Yen and buy dollars, which has been the main factor weakening the Yen since the monetary policies diverged sharply in 2022. We are currently seeing a clash between the government, which is planning more fiscal stimulus, and the central bank, which is focused on controlling inflation. This conflict between spending and tightening is likely to increase currency volatility in the coming weeks. Traders using derivatives should be ready for larger price fluctuations, making strategies like buying straddles or strangles potentially profitable for capturing significant movements. Moreover, the Yen’s status as a safe-haven asset seems to be waning. During smaller global equity market downturns, such as in October 2025, the Yen did not strengthen as it typically would. The currency’s movement is now driven more by interest rate expectations than by overall market risk. Create your live VT Markets account and start trading now.

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