Insights 
VT 
The USD/JPY is currently stabilising below the 155.00 level after recent gains. Analysts at BBH report that this marks the next major resistance point.
Japan’s Finance Minister, Satsuki Katayama, has emphasised the government’s vigilance over the yen’s rapid movements. He noted recent one-sided currency moves and indicated the government’s readiness to monitor foreign exchange markets closely for excessive or disorderly movements.
Limited Potential To Stabilise Yen
Despite these concerns, the potential for stabilising the yen remains limited without the Bank of Japan adopting a more assertive policy stance. The current neutral position of the BOJ is not sufficient to halt the yen’s decline, potentially only slowing its depreciation temporarily.
The FXStreet Insights Team curates observations from market experts, combining insights from commercial sources with contributions from both internal and external analysts.
We see the USD/JPY pair testing the significant 155.00 resistance level. This sustained pressure comes from the wide interest rate gap between the US Federal Reserve’s 4.5% and the Bank of Japan’s 0.25% policy rate. This fundamental difference makes holding dollars far more attractive than yen.
Officials in Tokyo are making verbal warnings against the yen’s rapid decline, expressing urgency. However, these warnings lack weight without a more aggressive policy shift from the Bank of Japan. The central bank’s recent decision to hold its course suggests it is not yet prepared to provide meaningful support for the currency.
Strategy For Derivatives Traders
For derivatives traders, this situation favors buying USD/JPY call options with strike prices above 155.00. This strategy allows for capitalizing on a continued upward trend driven by policy divergence. The defined risk, limited to the premium paid, offers protection against a sudden, sharp reversal caused by official intervention.
We must remember the interventions seen back in the autumn of 2022 and again in the spring of 2024 when the pair crossed similar key levels. This history shows that while the underlying trend is up, the risk of a sharp, multi-yen drop is very real around these high water marks. Therefore, a strategy with limited downside is prudent.
The upward pressure on the dollar is reinforced by recent data, with last month’s US Non-Farm Payrolls showing a robust 210,000 new jobs. Meanwhile, Japan’s latest core inflation reading of 2.7% is not high enough to force the BOJ into aggressive action. This divergence is likely to continue fueling yen weakness into the new year.
