Insights 
VT 
The USD/JPY currency pair dipped below 155.0 on Monday due to an increase in Japanese 10-year bond yields. This movement followed hawkish remarks from BoJ Governor Ueda. The pair later rebounded as markets processed these developments.
Japanese bond yields surged by approximately 6 basis points before easing by nearly 3 basis points. Markets are now considering a possible 20 basis point hike in December. The USD/JPY briefly traded below 155.0, with suggestions that a further decline this week could occur unless BoJ officials soften their hawkish stance.
Impact Of Recent BoJ Remarks
The recent dip below 155.00 in USD/JPY is a significant signal for us. This move was directly fueled by hawkish remarks from the Bank of Japan, which caused a spike in 10-year government bond yields. We see a strong case for further yen strength unless the BoJ unexpectedly softens its tone in the coming days.
The Bank of Japan’s stance is reinforced by recent inflation figures, which we are watching closely. Japan’s national core CPI for October 2025 registered at 2.9%, holding above the central bank’s 2% target for the 19th straight month. This sustained pressure, unlike the more transitory inflation seen in years past, makes further policy tightening seem almost inevitable.
On the other side of the pair, recent US economic data supports a weaker dollar outlook. The latest Non-Farm Payrolls report for November showed a moderation in the labor market, adding 155,000 jobs against forecasts of 180,000. This clear divergence in central bank outlooks between a hawkish BoJ and a potentially pausing Fed is setting up the pair for a sustained move lower.
Market Positioning Strategy
In the coming weeks, we believe positioning for a continued slide in USD/JPY is the primary trade. This suggests buying JPY calls or USD puts, especially with one-month implied volatility now pushing 11.5%, reflecting rising market expectations of a larger move. The market is currently pricing in a 20 basis point hike for the December meeting, so options strategies should be structured around that key event.
