The Japanese Yen is currently weak against the rising US Dollar, nearing its lowest level since mid-February. This decline is due to Japan’s potential fiscal spending and reluctance to raise interest rates. Concerns about economic risks from a possible US government shutdown might slow down the Yen’s depreciation. On the other hand, the robust US Dollar is supported by the Federal Reserve’s hawkish stance, increasing expectations for the USD/JPY currency pair.

Prime Minister’s Fiscal Support

Japan’s Prime Minister backs fiscal spending despite inflation, leading to expectations that the Bank of Japan may delay interest rate hikes. The USD remains strong at a three-month high, influenced by Federal Reserve statements and optimism about better US-China trade relations. The USD/JPY pair displays bullish trends, supported by technical indicators and positive market sentiment. If the USD/JPY corrects from recent highs, it may find support around the 153.65 level, with additional support near 153.00. If this level breaks, it could drop to the 151.00 zone. The Federal Reserve employs tools like interest rate changes and, if needed, quantitative easing or tightening to influence the Dollar’s value. These measures aim to ensure price stability and full employment in the US economy. As of today, November 3, 2025, the Japanese Yen continues to weaken against the US Dollar, with the USD/JPY pair trading near 158.50. The policy divergence established years ago is still present. The Bank of Japan has only executed a single cautious rate hike to 0.1% earlier in 2025, which has not narrowed the interest rate gap with the United States.

Currency Intervention and Trading Strategies

Although the prediction of Sanae Takaichi becoming Prime Minister did not occur, the current government continues to implement fiscal stimulus to support the economy. This policy, alongside the BoJ’s hesitance to tighten aggressively, puts pressure on the Yen. It shows that Japanese authorities are focused on economic growth over currency strength for now. At the same time, the US Federal Reserve maintains its “higher for longer” interest rate approach, due to persistent inflation. Recent data shows the core Consumer Price Index (CPI) for October 2025 at 3.4%, well above the Fed’s 2% target. This keeps the US Dollar strong and fuels upward momentum in USD/JPY. For derivative traders, the main risk has shifted from whether the Yen will weaken to the possibility of intervention from Japanese authorities. Authorities intervened in 2024 when the pair crossed the 160 level, which remains a critical psychological barrier. If the USD/JPY approaches this level again, the chances of a sudden Yen strengthening will rise sharply. Given the strong upward trend but the risk of a sudden reversal, outright purchasing USD/JPY call options has become costly and risky. A better strategy is to use bull call spreads, allowing traders to benefit from a gradual rise towards the 159.50-160.00 area. This strategy limits risk and caps potential profit, making it safer to trade the expected upward trend while protecting against sudden intervention. Looking back, the breakout above the 155.00 mark, once a distant psychological target, was a key factor in the recent rise. This level has now shifted from major resistance to significant support. Any corrective dips will likely be met with strong buying well before reaching this zone, with traders focused on the 157.00 level as the first line of defense. Create your live VT Markets account and start trading now.

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