The USD/JPY is weakening around 155.00 as the Japanese Yen strengthens. This change comes as many expect the Bank of Japan (BoJ) to raise interest rates on Friday. Key US economic data like Nonfarm Payrolls, Retail Sales, and PMI will be released later today. Growing speculation about a BoJ rate hike is supporting the Yen and affecting the USD/JPY pair. A recent Reuters poll shows that 90% of economists believe the BoJ will increase short-term rates from 0.50% to 0.75%. This is a big jump from last month’s prediction of just 53%.

Impact of US Economic Data

A government shutdown has delayed important US data, which will come out today, including job reports for October and November. These reports may influence the outlook for the Federal Reserve’s January meeting. Strong employment numbers could strengthen the USD. The Yen is influenced by various factors, including BoJ policies, the difference between Japanese and US bond yields, and traders’ attitudes toward risk. As a safe-haven currency, the Yen often appreciates during uncertain market conditions. Past ultra-loose monetary policy from the BoJ led to a weaker Yen, but recent changes have provided some support. Moves in the US-Japan bond yield differential also impact the Yen’s value.

Potential Strategies for Traders

The USD/JPY pair is weakening near 155.10, with expectations of a BoJ interest rate hike this Friday. Additionally, delayed US economic data, including crucial job reports, will be released today. This mix of events creates uncertainty and a tendency for a stronger Yen in the short term. The market seems to have mostly accounted for a BoJ rate hike to 0.75%, supported by recent data. For example, Japan’s national core inflation was 2.7% year-over-year in the latest November report, marking the 20th consecutive month above the BoJ’s 2% target. This ongoing inflation gives the BoJ a solid reason to tighten its monetary policy. Conversely, the US job reports for October and November are crucial. There has been a general softening in the US labor market in the latter half of 2025, with job creation averaging about 165,000 per month in the third quarter, down from over 230,000 earlier this year. If today’s figures confirm this trend, it may raise expectations for a Federal Reserve rate cut in early 2026, putting more pressure on the dollar. For traders using derivatives, this environment suggests preparing for a lower USD/JPY exchange rate. We recommend buying put options with strike prices below 154.00 for expiry in the next few weeks. This approach can help traders take advantage of a possible downward movement while managing risk ahead of the impactful data releases. Looking back, significant volatility occurred earlier in 2025 when the BoJ ended its negative interest rate policy, causing a sharp drop in the pair. There were also strong interventions by Japanese authorities in 2024 when the exchange rate exceeded 160. This history indicates strong official resistance to a greatly weakened Yen, and with policy tightening now underway, the fundamental trend is toward a lower USD/JPY. Create your live VT Markets account and start trading now.

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