The Japanese yen edged higher against major peers despite Bank of Japan Governor Kazuo Ueda's subtle suggestion of a potential rate hike, as market participants remain skeptical about imminent monetary tightening under Prime Minister Shigeru Takaichi's administration.
- Yen rose 0.6% to 152.30 against the U.S. dollar in mid-day Tokyo trading
- 10-year JGB yield held at 0.92%, reflecting low demand for higher-yielding assets
- Market pricing assigns less than a 35% chance of a BOJ rate hike before Q3 2026
- USD/JPY fluctuated between 152.10 and 153.40 amid ongoing volatility
- Three-month forward points show a 1.2% discount on the yen, indicating bearish bias
- Nikkei 225 declined 0.3%, and equity index futures dropped 0.4%
The yen rose 0.6% against the U.S. dollar to 152.30 by mid-day Tokyo trading, reversing earlier losses, as traders digested comments from BOJ Governor Kazuo Ueda during a parliamentary session on November 21, 2025. Ueda hinted that the central bank could consider raising interest rates if inflation persists above the 2% target, a signal that did not sway bearish sentiment on the currency. Market expectations for a BOJ rate hike have cooled significantly since the appointment of Prime Minister Shigeru Takaichi, whose public stance against aggressive monetary tightening has reinforced the perception that policy normalization will be delayed. The 10-year Japanese government bond yield held steady at 0.92%, reflecting low demand for higher-yielding assets amid prolonged deflationary pressures. The USD/JPY pair remained volatile, fluctuating between 152.10 and 153.40, while the yen’s three-month forward points showed a 1.2% discount, signaling persistent bearish sentiment. These figures underscore a divergence between the BOJ’s cautious forward guidance and market pricing, which now assigns less than a 35% probability to a rate hike before Q3 2026. The divergence is affecting international investors, particularly those in emerging markets relying on JPY-denominated funding. Japanese equity index futures declined 0.4% as capital outflows intensified, while the Nikkei 225 registered a 0.3% drop, suggesting that low interest-rate expectations continue to suppress asset valuation gains.