Insights 
VT 
USD/JPY remains steady above 153.50, close to its recent peak near 154.50. This comes as Japanese nominal wages rose by 1.9% year-on-year in September, aligning with forecasts and up from 1.3% in August.
Scheduled pay growth for full-time workers in Japan eased to a six-month low of 2.2% year-on-year, against a 2.5% expectation and down from 2.4% in August. Japan’s wage growth, influenced by an annual total factor productivity growth of approximately 0.7%, does not drive inflation significantly, though there is potential for wage growth to increase.
Wage Negotiations Influence
The UA Zensen labour union plans a 6% rise in regular employee wages next year, following a 4.75% gain agreed for 2025. BOJ Governor Kazuo Ueda is monitoring the ‘initial momentum’ of annual wage talks before changing monetary policy. Meanwhile, the swaps market anticipates equal chances of a December rate hike, with a full 25 basis point increase expected in Q1.
Given that USD/JPY is holding firm above 153.50, we see the US dollar’s strength as a key driver. Recent US inflation data from late October 2025 showed core CPI remaining stubborn at 3.4%, reinforcing the view that the Federal Reserve will not be cutting rates anytime soon. This policy divergence between a hawkish Fed and a hesitant Bank of Japan (BOJ) continues to support the pair at these elevated levels.
The latest Japanese wage data from September does little to force the BOJ’s hand for an immediate rate hike. While nominal wages grew, scheduled pay for full-time workers actually slowed, which suggests underlying inflationary pressure from wages is not yet running hot. This supports our view that the BOJ will likely wait for more conclusive evidence before adjusting its policy in December.
However, the forward-looking picture is what traders should focus on. The plan by the UA Zensen union to demand a 6% wage increase in 2026 is a significant development that the BOJ cannot ignore. The market is already fully pricing in a 25 basis point rate hike by the end of the first quarter of 2026, creating a clear timeline for a potential major policy shift.
Government Intervention Risk
We must also be highly aware of government intervention risk at these levels. Looking back at the events of late 2022 and early 2023, Japanese authorities stepped in to buy yen when the rate moved aggressively through the 150-152 range. With the pair currently trading above 153.50, the risk of sudden, sharp downside volatility caused by intervention is considerably higher than it was just a few months ago.
For derivative traders, this environment suggests buying volatility may be prudent. Long straddles or strangles could benefit from a large move in either direction, whether it’s a breakout towards 155 on continued BOJ inaction or a sharp drop to below 150 on surprise intervention. For those with a directional bias, purchasing out-of-the-money options offers a defined-risk way to position for these potential catalysts in the coming months.
