Insights 
VT 
Bank of Japan Meeting Minutes
The US Dollar is regaining ground against the Japanese Yen, moving back towards 154.00 after recent lows just below 152.00. This rebound is tentative amid a risk-averse market as investors focus on upcoming US employment and services data.
Minutes from the Bank of Japan’s October meeting reveal caution about further interest rate hikes, amidst potential economic risks from US tariffs. Japan’s top FX official notes that the Yen’s recent movements deviate from fundamentals, similar to levels that triggered BoJ interventions previously.
Risk aversion is driving the market, with expectations tapering for further Fed monetary easing in December. The ongoing US government shutdown is nearing its fifth week and could become the longest in history, adding pressure.
US Employment and Services Data
The US Dollar Index stays near three-month highs as markets anticipate the October ADP Employment Report, expecting a 25,000 increase in private employment following a September drop. Additionally, the US ISM Services PMI is forecasted to show a modest rise in October.
The BoJ’s policy for low rates and stimulus since 2013, modified in 2024, affected the Yen’s value against other currencies. Technical analysis shows USD/JPY remains strong while above 153.00 but faces challenges near levels like 154.50 and 154.85.
The USD/JPY is sitting near 154.00, a critical point where opposing forces are meeting. We see a strong dollar, fueled by risk aversion from the ongoing US government shutdown, clashing directly with the threat of Japanese intervention. The Bank of Japan’s cautious meeting minutes suggest they are hesitant to hike rates, which naturally weakens the yen.
The primary risk for any long dollar positions is direct intervention from Japanese authorities. We saw them step in during 2022 when the pair crossed 151.90, and again in early 2024, making these levels extremely sensitive. The recent verbal warnings from Japan’s top currency diplomat should be seen as a final notice before potential action.
Data released today shows the US economy remains resilient, which will likely keep the Federal Reserve from considering rate cuts. The October ADP Employment Report showed a gain of 45,000 jobs, beating the low expectation of 25,000. This, combined with the ISM Services PMI reading of 51.2, reinforces the policy divergence that has been pushing the dollar higher all year.
Meanwhile, Japan’s national Core CPI for September, which we saw released a couple of weeks ago on October 18, 2025, was 2.7%. This persistent inflation, well above the Bank of Japan’s 2% target, puts them in a difficult position. Their hesitation to tighten policy further is the main driver of yen weakness, but it becomes harder to justify with each passing month of high inflation.
Given this high tension, we should consider strategies that benefit from a sharp increase in volatility. Buying out-of-the-money puts on USD/JPY offers a relatively cheap way to protect against a sudden, sharp drop if the Bank of Japan intervenes. Implied volatility is rising, and a straddle could also be used to profit from a large move in either direction.
Alternatively, for those who believe US economic strength will force the pair higher, a bull call spread is a prudent approach. This would allow us to profit from a move towards 155.00, while also defining our risk and limiting losses if intervention does occur. We should avoid holding large, unhedged long positions until the threat of official selling subsides.
