USD/JPY remains on an upward trend, with markets scaling back expectations for an October rate hike. Etsuro Honda, an adviser to the incoming Prime Minister Takaichi, suggests a December hike of 25 basis points might be feasible depending on economic conditions. The current rate stands at 150.80, according to OCBC analysts Frances Cheung and Christopher Wong.

Potential Risks in the USD/JPY Trend

There is a risk of further increases unless the dollar falls significantly or if the Bank of Japan hints at an earlier rate hike. Attention should be on Takaichi’s policy execution, cabinet reshuffling, budget and trade policies, including reviewing the US-Japan trade deal. Finance Minister Kato has commented on monitoring large fluctuations in the FX market without raising alarms currently.

Market indicators suggest bullish momentum with the RSI rising and a potential golden cross forming. Risks continue to lean towards a rise, with resistance levels at 150.90, 151.70, and 152.50, while support sits at 148.30, 147.80, and 146.50. The USD/JPY could retain a strong position unless significant shifts in US economic policy or Japanese financial signals occur.

With USD/JPY trading at 150.80, expectations for a Bank of Japan rate hike this month are fading. An advisor to the incoming Prime Minister has signaled that a quarter-point hike in December is more likely, depending on the economy. This delay in tightening policy is keeping the yen weak and the currency pair well-supported.

The dollar side of the equation remains strong, adding to the upward pressure on the pair. The latest U.S. jobs report from early October 2025 showed surprisingly resilient hiring, keeping the Federal Reserve on a path of holding interest rates high. We see little reason for a significant dollar sell-off in the immediate future without a major shift in U.S. economic data.

Domestically Driven Inflation Concerns

Domestically, Japan’s latest core inflation reading for September 2025 came in at 2.7%, remaining stubbornly above the central bank’s 2% target for over a year. This persistent inflation is why we believe a rate hike is a matter of when, not if, creating underlying tension in the market. The current political view, however, is to wait until December to act.

We must be mindful of the Ministry of Finance, as verbal warnings about “excessive moves” are increasing. Looking back at the interventions of late 2022, we know the ministry has acted forcefully between the 150 and 152 levels to defend the yen. While the “line in the sand” may have shifted, the risk of sudden, sharp intervention grows with every point the pair climbs.

Given the bullish technical signals, like the emerging golden cross, traders should consider strategies that profit from a continued grind higher. Buying call options or constructing bull call spreads on USD/JPY could capture further upside while defining risk against a sudden intervention. These positions would benefit from the upward momentum while capping potential losses if the Ministry of Finance steps in.

The options market reflects this upside bias, as one-month risk reversals continue to show a premium for USD calls over puts. This indicates that traders are actively positioning for further gains, betting that the fundamental drivers will outweigh intervention threats in the near term. We see resistance near 150.90 and then at the 151.70 level.

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