The USD/JPY has risen to nearly 154.40, its highest point in about nine months. This increase comes as the Japanese Yen faces selling pressure, partly due to lower expectations for interest rate hikes from the Bank of Japan. The Yen appears weak, especially against the Swiss Franc, with its performance reflected in percentage changes against major currencies. Economic advisor Takuji Aida warned that raising interest rates in December could be risky for the Bank of Japan.

Performance of the Japanese Yen

Japan’s Prime Minister, Sanae Takaichi, supports public spending and is delaying any monetary tightening. Investors are keeping an eye on the Producer Price Index data and updates on the US economy. The US Dollar has dipped slightly, with the Dollar Index at around 99.55 after the funding bill moved from the Senate to the House. Delayed US economic reports, caused by the government shutdown, are expected to affect monetary policy expectations. The US Dollar is the most traded currency globally, with over $6.6 trillion in transactions each day. The Federal Reserve’s policies, including interest rates and other measures, play a key role in determining the Dollar’s value. In extreme situations, the Fed might use quantitative easing or tightening, both of which influence the US Dollar in different ways. We’re observing the USD/JPY pair inching towards 154.50, a level we haven’t seen in almost nine months. This trend is fueled by growing belief that the Bank of Japan won’t raise interest rates in December. Comments from economic advisor Takuji Aida support this view, lowering the value of the Yen.

Inflation and Interest Rates

The Bank of Japan’s hesitation on policy comes even as Japan’s core inflation has remained above the 2% target for nearly two years, registering 2.8% in the latest October 2025 data. However, as real wages fall for the 26th month in a row, the Bank has little reason to tighten policy, as it could harm consumers. In contrast, the US recently reported robust job numbers for October, adding 205,000 jobs and keeping the Fed on a steady, data-driven path. For derivative traders, this scenario supports strategies that benefit from a rising USD/JPY. Buying call options with strike prices above 155.00 now seems appealing. The significant interest rate gap also makes long positions attractive as a positive carry trade. We’ve seen similar patterns before, especially during the major rally in 2022 and 2023 when the pair surpassed the 150 mark. That increase was also caused by a wide gap between US and Japanese monetary policies. Traders should pay attention to any warnings from Japan’s Ministry of Finance as we approach levels that might prompt intervention. In the coming weeks, focus will shift to the backlog of US economic data delayed by the recent government shutdown. Any indication of sustained US inflation or a strong labor market could further weaken the Yen. The key risk to this outlook is a sudden dovish shift from the Federal Reserve or direct intervention in the currency market by Japanese authorities. Create your live VT Markets account and start trading now.

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