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05.12.202509:40 Forex Analysis & Reviews: Yen Continues to Show Growth

Relevance up to 02:00 2025-12-06 UTC--5

The Japanese yen rose against the dollar after rumors circulated that officials at the Bank of Japan are ready to raise interest rates this month.

Exchange Rates 05.12.2025 analysis

It is expected that next week, the BOJ will also announce its intention to continue raising rates if its economic forecasts are realized, while exercising caution about how much it will ultimately raise rates.

Such expectations are fueled by domestic pressure to combat inflation, strengthen the national currency, and stimulate sustainable economic growth. A stronger yen may also help reduce import costs, in turn lessening the inflationary pressure that Japanese consumers have been feeling lately.

The BOJ's decision to raise rates would mark another important step toward normalizing monetary policy. However, there is a risk that an increase in rates that is too sharp or rapid could negatively impact the economy, especially for companies that have become accustomed to low interest rates.

At the same time, many experts caution against the need for caution, as the BOJ is likely to act gradually and thoughtfully to avoid destabilizing the economy, as occurred after the first rate hike. It is expected that the central bank will carefully monitor economic data and respond accordingly.

Clearly, key members of Prime Minister Sanae Takichi's government will not attempt to stop the BOJ if it decides to raise interest rates, although some high-ranking officials are opposed to such a decision.

Overnight index swaps now indicate about a 90% probability of a rate hike this month, compared to less than 60% a week earlier.

New reports regarding policy changes emerged after BOJ Governor Kazuo Ueda gave the clearest hint yet at the possibility of a rate increase at the December meeting. Such a move by the central bank could support the yen, which has performed the worst among currencies this quarter.

At this point, buyers need to reclaim the nearest resistance at 154.70. This will allow for targeting 155.10, beyond which breaking through will be quite challenging. The farthest target will be the area of 155.45. If the pair falls, bears will attempt to take control of 154.40. If they succeed, breaking through that range will deal a serious blow to bullish positions and push USD/JPY down to the low of 154.10, with the prospect of reaching 153.70.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Jakub Novak,
Analytical expert of InstaSpot
© 2007-2025
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