USD/JPY has climbed to around 152.65 during early trading on Friday in Asia, mainly due to the Japanese Yen weakening against the US Dollar. This rise comes as traders wait for the US Consumer Price Index (CPI) inflation report for September, set to be released later today.
Japan’s National CPI rose by 2.9% year-on-year in September, which met expectations. The Core CPI increased by 3.0%. Additionally, the US has imposed new sanctions on Russian oil companies, which affects the JPY since Japan heavily relies on oil imports, further weakening the yen.
US CPI Report Impact
The upcoming US CPI report could have a big impact on the USD/JPY pair, even with the government shutdown in place. Analysts predict a 3.1% year-on-year rise for both headline and core CPI. Any unexpected results may change the value of the USD.
The Japanese Yen’s value mainly reflects how well Japan’s economy is doing and the policies of the Bank of Japan. The difference in bond yields between Japan and the US, along with overall market sentiment, can also affect the Yen’s strength. In uncertain market times, investors typically seek the Yen as a safe-haven currency.
When USD/JPY was above 152.50, it marked a turning point for policy expectations. This was followed by a volatile phase that led to a spike toward 160 in April 2024, prompting a record intervention of ¥9.8 trillion by Japanese authorities. Now, in late October 2025, USD/JPY is more stable around 148.00. The focus has shifted from intervention to the growing policy gap between the US and Japan.
Interest Rate Policies
The Bank of Japan made a historic decision to end negative interest rates in March 2024, but they’ve only raised rates twice since then, keeping the policy rate at 0.5%. In contrast, the US Federal Reserve paused for most of 2024 but has just started easing. The Fed Funds Rate is currently at 4.75%, creating a notable interest rate gap that favors holding US dollars over yen.
In this environment, implied volatility in USD/JPY seems too low. One-month options indicate calmer conditions, with current implied volatility around 8.2%, a significant drop from the 12% seen during last year’s intervention. For traders, this makes buying long-dated call options on USD/JPY an appealing way to position for a potential rise if US economic strength continues.
It’s important to note that rising oil prices are again putting pressure on the yen, as Japan is a major energy importer. With Brent crude prices holding steady above $95 per barrel this month, Japan’s trade deficit is widening again. This ongoing economic pressure makes it hard to argue for sustained yen appreciation in the near future.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
