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15.12.202518:20 Forex Analysis & Reviews: Traders expect the Central Bank of Japan to raise interest rates

Relevance up to 06:00 2025-12-16 UTC--5

The yen strengthened again against the U.S. dollar after the Bank of Japan pointed to further progress on wages, a key factor that effectively confirms the need for an interest rate hike at the meeting scheduled for this week. The report shows that, despite U.S. tariffs, the trend toward rising wages remains intact.

Exchange Rates 15.12.2025 analysis

"In most reports from the head office and regional branches, it was noted that companies expect wage increases in fiscal year 2026 at roughly the same pace as in fiscal year 2025, when strong wage growth was recorded," the Bank of Japan said in a report published on Monday.

The market reacted swiftly to these signals, interpreting them as a harbinger of further monetary policy tightening. However, not all experts and analysts are so optimistic. Some warn of potential risks associated with a shift in monetary policy, fearing that higher interest rates could negatively affect Japan's already fragile economy, slow growth, and trigger a new wave of deflation.

Earlier this month, Governor Kazuo Ueda said the bank would actively collect data on wage growth in order to make an appropriate decision on a rate hike at the meeting to be announced this Friday. The report released on Monday was the first such report by the bank. The positive results allow Ueda to readily justify raising the policy rate to 0.75%.

The Bank of Japan report states that most companies appear to believe it is necessary to raise wages in fiscal year 2026 in the same way as in fiscal year 2025, citing corporate views on staff retention and boosting employee motivation amid a persistent and severe labor shortage.

According to overnight index swap market data, traders are pricing in roughly a 94% probability of an interest rate hike this week.

As for the current technical picture of USD/JPY, buyers need to break through the nearest resistance at 155.30. This would open the way toward 155.60, above which a breakout would be quite difficult. The most distant target lies in the 156.10 level. In the event of a decline, bears will attempt to regain control at 154.90. If they succeed, a break of this range would deal a serious blow to bullish positions and push USD/JPY down toward the 154.65 low, with the prospect of a move to 155.35.

*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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