USD/JPY stayed on the back foot into the weekend as the Yen outperformed after the Bank of Japan kept a hawkish stance, although the pair pared losses as the US Dollar recovered. The pair traded near 157.43 after earlier sliding to 156.96, leaving it on course to finish the month little changed. The BoJ held its policy rate at 1.25% in an 8-1 vote, with Hajime Takata dissenting in favour of a 25-basis-point rise to 1.50%. The central bank reiterated that it will keep lifting rates as economic, price and financial conditions evolve, with the timing and pace tied to its baseline outlook and associated risks.
Market focus shifted to guidance and pricing. The BoJ said underlying CPI inflation is “generally consistent” with its 2% target set in 2013, while making minor growth revisions and lifting its inflation forecasts for 2027; it also described inflation risks as skewed to the upside and risks to the outlook as generally balanced. Swaps pricing still implied 80% odds of a 25bps move to 1.50% at the 18 December meeting and nearly 75bps of tightening over the next 12 months. In the US, a tech-led equity sell-off boosted demand for government bonds and pushed Treasury yields down, yet the Dollar Index rebounded towards 102.00 after dipping to 101.59. Traders priced about a 72% chance of a December Fed hike via CME FedWatch, with PCE inflation still above 2% and third-quarter GDP growth running stronger than expected.
Monetary Policy And Rate Divergence
monetary policy policy divergence USD JPY carry trade volatility option strategies options implied volatility JPY statistics 2024 2025 2026
Recent Historical References
or historical references (e.g., 2022-2024 BoJ hikes).
