Insights 
VT 
Japan’s top tariff negotiator, Ryosei Akazawa, and US Commerce Secretary, Howard Lutnick, confirmed the United States and Japan trade agreement’s role in reinforcing strategic and economic ties. Both parties agreed to continue efforts in implementing their trade deal as Japan undergoes a leadership transition.
The USD/JPY pair saw a minor decrease of 0.06% at 152.97. The Japanese Yen, one of the most traded currencies, is influenced by Japan’s economic performance, Bank of Japan policies, bond yield differentials, and trader risk sentiment.
Bank Of Japans Monetary Policy
The Bank of Japan’s interventions in currency markets aim to manage the Yen’s value. The bank has pursued an ultra-loose monetary policy between 2013 and 2024, resulting in Yen depreciation, but recent steps to unwind this policy have supported the currency.
Over the past decade, the BoJ’s commitment to ultra-loose monetary policy led to a widening gap with other central banks, particularly the US Federal Reserve. The BoJ’s 2024 decision to phase out this policy alongside global interest rate cuts is reducing this gap.
The Yen is viewed as a safe-haven investment, attracting investors during market stress due to its perceived reliability, boosting its value over riskier currencies.
With USD/JPY trading at 152.97, we see significant risk for those holding long dollar positions against the yen. This level is historically high, and the reaffirmation of the US-Japan trade agreement does little to change the currency’s fundamental drivers. The market is primarily focused on central bank policy divergence and the growing threat of direct intervention.
Monetary Policies And Currency Trends
The Bank of Japan has been slowly moving away from its ultra-loose policy that ended in 2024, having recently hiked its policy rate to 0.25% in September 2025 as inflation remains above its 2% target. This slow but steady normalization signals a clear intention to support the yen over the medium term. This contrasts sharply with the policies of the previous decade.
Meanwhile, the US Federal Reserve has started a cautious easing cycle, cutting rates twice this year as inflation has cooled to 2.8%. This policy shift is narrowing the interest rate differential between the US and Japan that previously drove the yen’s weakness. This narrowing trend is a key factor that should limit further significant gains for the USD/JPY pair.
We must remember the Japanese Ministry of Finance’s interventions back in the spring of 2024, when they sold dollars to defend the yen as the exchange rate approached 160. The current level of 152.97 is well within the zone that previously triggered official action. The risk of another intervention to strengthen the yen is now extremely high, creating a ceiling for the pair.
For derivative traders, this environment suggests that betting on further yen weakness is a high-risk strategy. Volatility is likely to increase, making options strategies attractive. Buying JPY call options (or USD/JPY put options) could offer a defined-risk way to profit from a potential sharp appreciation in the yen.
Considering ongoing global economic uncertainty and slowing growth forecasts, the yen’s traditional safe-haven status could also come back into play. Any significant risk-off event in global markets would likely trigger capital flows into the yen. This provides another potential catalyst for the currency to strengthen in the coming weeks.
