The US Dollar continues its upward trend against the Japanese Yen, hitting 152.60. This marks the pair’s appreciation for four consecutive days, driven by speculation about a potential large-scale stimulus programme in Japan.

Japan Economic Stimulus Impact

Reports have surfaced about a possible USD 90 billion package aimed at mitigating rising household costs in Japan. This development is expected to impact Japan’s public finances and has led to a weaker Yen. The rise in the US Dollar is supported by increased demand for safe havens amidst US-China trade tensions.

Concerns over Japan’s public finances are growing, particularly with the nomination of Sanae Takaichi as the new prime minister. Takaichi is anticipated to increase government spending, potentially challenging the Bank of Japan’s monetary tightening plans.

Japan’s CPI data for September is expected to confirm rising inflationary pressures, which could support the Yen. This release will be watched closely, as higher inflation might reinforce the Bank of Japan’s plans to raise interest rates.

Japan’s National Consumer Price Index (CPI) reflects the price fluctuation of goods and services. The next release is scheduled for October 23, 2025, with a consensus expectation of 2.9%, following a previous 2.7% reading.

With the US dollar pushing past 152.50 against the yen, the main driver is Japan’s potential $90 billion stimulus package. This government spending suggests continued pressure on the yen, as it prioritizes economic growth over currency strength. The market is viewing this as a clear signal of ongoing yen weakness.

Intervention Risk and Trading Strategies

However, we must be extremely cautious at these levels, as this territory invites government intervention. Looking back, we saw Japan’s Ministry of Finance step in to buy yen and strengthen the currency in both late 2022 and the spring of 2024 as the dollar approached similar highs. The risk of a sudden, sharp reversal orchestrated by officials is now significantly elevated.

Two key inflation reports are creating major uncertainty in the immediate term. Tonight’s Japanese CPI, with a consensus forecast of 2.9%, could offer temporary support to the yen if it comes in hot, while tomorrow’s US CPI will determine the dollar’s next move. These back-to-back data points make any directional bet highly speculative over the next 24 hours.

For traders wanting to follow the upward momentum, buying call options on USD/JPY is a direct play on continued yen weakness. This strategy allows profiting from a further rise while limiting downside risk to the premium paid, which is crucial given the intervention threat. The stimulus news and the new fiscally-dovish prime minister provide a strong fundamental basis for this view.

Given the high event risk, a volatility play may be more prudent for the coming days. Buying an options straddle or strangle allows a trader to profit from a large price swing in either direction following the inflation data, without needing to predict the outcome. This approach capitalizes on the current uncertainty itself rather than a specific directional bias.

The bigger picture remains the wide interest rate gap between the US and Japan. We remember the Bank of Japan only ended its negative interest rate policy in March 2024 and has been incredibly slow to raise rates since. This policy divergence with a still-hawkish Federal Reserve will likely keep the yen fundamentally weak for the foreseeable future, even if short-term pullbacks occur.

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