Insights 
VT 
USD/JPY has risen to approximately 152.65 during early Friday’s Asian trading, driven by the weakening Japanese Yen against the US Dollar. This movement comes as traders anticipate the release of the US Consumer Price Index (CPI) inflation report for September later that day.
Japan’s National CPI increased by 2.9% year-on-year in September, matching expectations, while the Core CPI showed a 3.0% rise. The US has imposed fresh sanctions on Russian oil companies, influencing the JPY due to Japan’s dependency on oil imports, contributing to the yen’s weakness.
US CPI Report Impact
The upcoming US CPI report, despite the US government shutdown, could significantly affect the USD/JPY pair. Expectations are set for a 3.1% year-on-year increase in both headline and core CPI figures, with any surprise result potentially impacting USD values.
The value of the Japanese Yen is primarily driven by the Japanese economy’s performance and the Bank of Japan’s policies. The differential between Japanese and US bond yields and broader market risk sentiment can also significantly influence the Yen’s value. In stressful market conditions, the Yen often attracts investors seeking a safe-haven currency.
We recall the tension when USD/JPY was trading above 152.50, as that period marked a significant turning point for policy expectations. What followed was a volatile ride, culminating in a spike toward 160 in April 2024 that triggered a record ¥9.8 trillion intervention by Japanese authorities. Now in late October 2025, with the pair stable around 148.00, the market is less focused on intervention and more on the widening policy gap between the US and Japan.
Interest Rate Policies
The Bank of Japan’s historic move to end negative interest rates in March 2024 has been followed by only two small rate hikes since, leaving their policy rate at just 0.5%. Meanwhile, the US Federal Reserve, after pausing for much of 2024, has only just begun its easing cycle, with the Fed Funds Rate still sitting at 4.75%. This leaves a substantial interest rate differential that continues to favor holding US dollars over yen.
This environment suggests that implied volatility in USD/JPY is too low, especially with one-month options pricing in relatively calm conditions. Current implied volatility is hovering around 8.2%, down significantly from the 12% levels seen during the intervention period last year. For traders, this makes buying long-dated call options on USD/JPY an attractive strategy to position for a potential move higher if US economic strength persists.
We must also remember how rising oil prices weighed on the yen, a factor that is relevant again today. Japan remains a major energy importer, and with Brent crude prices firming above $95 per barrel this month, its trade deficit is showing signs of widening once more. This underlying economic pressure makes it difficult to build a strong case for sustained yen appreciation in the weeks ahead.
