The USD/JPY pair reached its highest levels since February 2025 today, approaching the psychological threshold of 155, driven by the fundamental conflict between the new Prime Minister Sanae Takaichi and the Bank of Japan. Takaichi, known as a proponent of expansionary fiscal policy and monetary easing in the spirit of Abenomics, is clearly signalling that the BOJ should keep rates unchanged “for as long as possible”, and her comments today (emphasising that “we cannot say that Japan has emerged from deflation”) are a direct appeal for interest rates to remain unchanged.
The reality is that Japan’s economy is shrinking (the third quarter is expected to show contraction on Monday) and inflation is beginning to weaken with the prospect of falling food prices, giving the BOJ a theoretical excuse to postpone a rate hike. Markets are currently pricing in only a 24 per cent chance of a hike in December, while around 50 per cent of analysts expect no move until February 2026, a significant shift from earlier expectations.
Takaichi’s stance towards the BOJ creates a scenario in which the yen may weaken even in the face of future interest rate hikes if the Prime Minister blocks clear signals of further tightening. Verbal intervention by Finance Minister Katayama has so far been ineffective, suggesting that the market is waiting for either concrete fiscal action from Takaichi or decisive movement from the BOJ to change the trajectory of the yen.
At the moment, a stable, long-term upward trend prevails on the USDJPY pair. The key support remains the 50-day exponential moving average (blue curve on the chart).
Source: xStation
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