The yen weakened after the Bank of Japan raised its policy rate by 25 bp to 1.25%, the highest level in more than three decades, as guidance on the pace of further normalisation was limited. The decision passed with a 7–2 vote. While Governor Kazuo Ueda said underlying inflation is nearing 2% and described policy as entering a “new stage”, he also stressed the need to avoid tightening financial conditions too quickly and pointed to next year’s shunto as a key test of wage-price dynamics, even as he left open the possibility of consecutive or larger moves.
Yen Sensitivity and Technical Outlook
In the near term, yen trading is expected to remain sensitive to UST–JGB yield differentials, with thin liquidity due to Japanese holidays from Monday to Wednesday potentially amplifying FX swings. USD/JPY last closed around 156.90, with interim resistance seen at 156.70–157.00, which aligns with the 21 DMA. Further resistance sits at 158, then 158.40 at the 100 DMA, and 159 at the 50 DMA, while support is flagged at 155 and around 153, with firmer inflation and wages, intervention risk, or repatriation flows acting as potential constraints on downside.
