Insights 
VT 
No Expected Policy Change
There is no expected policy change from the BoJ, although tightening may occur in December or January. Treasury Secretary Bessent urged Japan’s government to enable the BoJ to address inflation through tighter policy.
Technical analysis suggests a possible decline for USD/JPY, with a double top in the low-153s, indicating a movement below 146. Market participants are attentively watching these developments for potential impacts on currency performance.
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Policy Shift on the Horizon
The Japanese Yen is soft right now, but we see a significant policy shift on the horizon. Fundamentals point to the Bank of Japan (BoJ) tightening in either December or January for the first time in this cycle. This means the current JPY weakness presents a tactical opportunity for positioning.
For over two years now, we’ve seen core inflation remain stubbornly above the Bank of Japan’s 2% target, recently clocking in at 2.7% for September 2025. Furthermore, the latest Tankan survey showed the largest corporations plan wage hikes of over 5.5%, a level not seen in three decades. This domestic pressure makes a rate hike almost inevitable.
This contrasts sharply with the Federal Reserve, which has already delivered 75 basis points in cuts this year to support a slowing US economy. This growing policy divergence between a hawkish BoJ and a dovish Fed adds significant fuel to the case for a stronger yen. The interest rate spread that has favored the dollar for so long is set to narrow considerably.
Given this outlook, we should consider buying put options on USD/JPY, targeting strikes below 146. Implied volatility is still relatively low, suggesting these options are not yet pricing in the full extent of a policy shock from the BoJ. This structure allows us to position for a significant drop while limiting our initial risk.
We must also remember the sharp interventions back in late 2022 and 2024 when the pair broke above 150. A hawkish policy shift from the BoJ itself would be a far more powerful and sustained catalyst for yen strength than those past actions by the Ministry of Finance. The potential for a rapid, multi-yen move downwards is very real.
