The USD/JPY pair is holding firm near the 154.00 mark, consolidating close to its eight-month high of 154.49 recorded on November 4. During Monday’s Asian session, the pair trades around 153.90, as the Japanese Yen (JPY) remains under pressure due to uncertainty surrounding the Bank of Japan’s (BoJ) monetary policy path.
BoJ’s Cautious Stance
BoJ board member Junko Nakagawa stated on Monday that the central bank will continue to make policy decisions carefully, given the persistent uncertainty in global trade conditions. She noted that while Japanese corporate profits could weaken amid tariff-related challenges, they are expected to recover as overseas economies rebound and domestic consumption improves on the back of stronger real wages.
Nakagawa also highlighted that medium- to long-term inflation expectations are gradually moving toward the BoJ’s 2% target, reflecting progress in achieving the bank’s price stability objective.
Meanwhile, the BoJ’s Summary of Opinions from its October meeting indicated that uncertainty remains high regarding the timing of policy normalization. However, it suggested that Japan’s economic environment may soon allow the BoJ to adjust policy rates, provided global market conditions stabilize and companies maintain active wage-setting behavior.
USD Supported by US Fiscal Developments
On the US side, the US Dollar (USD) finds additional support after reports that the US Senate has advanced a government funding bill aimed at ending the ongoing shutdown. The Senate voted 60–40 in favor of extending the enhanced Affordable Care Act (ACA) subsidies, bringing the bill closer to final passage. The proposal must still be approved by the House of Representatives and signed into law by President Donald Trump, a process that may take several days, according to Reuters.
Japanese Yen Fundamentals
Key Drivers of the Japanese Yen (JPY):
The Yen is among the most traded currencies globally, with its value influenced by BoJ policy decisions, interest rate differentials, and overall risk sentiment in financial markets.
Impact of BoJ Policy:
The BoJ plays a pivotal role in managing the Yen’s value. Historically, it has pursued ultra-loose monetary policy, keeping interest rates near zero to stimulate growth. This approach, maintained from 2013 to 2024, contributed to Yen weakness as other central banks tightened policy. Recently, the BoJ has begun gradually unwinding its ultra-loose stance, which has provided modest support to the currency.
Yield Differential Effect:
A key factor in USD/JPY movements is the interest rate gap between US and Japanese government bonds. The BoJ’s dovish policy has widened this gap, favoring the Dollar. However, as the BoJ considers policy normalization while the Federal Reserve signals rate cuts, this differential is expected to narrow, potentially strengthening the Yen.
Risk Sentiment Influence:
The Yen is widely viewed as a safe-haven currency, attracting demand during periods of global financial uncertainty. Conversely, when risk appetite rises, investors tend to move away from the Yen toward higher-yielding assets, weighing on its value.
In summary:
The USD/JPY pair remains firm near 154.00, supported by a stronger US Dollar and lingering doubts over the BoJ’s next policy move. Unless Japan’s rate hike outlook becomes clearer or global risk sentiment shifts in favor of the Yen, the pair may continue to trade near multi-month highs.
