"The outlook for USDJPY in mid-November 2025 continues to lean in favour of the U.S. dollar, primarily due to the stark divergence in monetary policy stances between the Federal Reserve and the Bank of Japan (BoJ). The pair is holding around the 154.5 level-near its highest range in many months-reflecting significant yen weakness at a time when interest-rate differentials between the two economies remain unusually wide. In the United States, the Federal Reserve has entered a rate-cutting phase."
"Even so, U.S. core inflation remains around 3%, and the labour market is only beginning to show signs of cooling. This prevents the Fed from shifting to a more aggressive easing stance, while real interest rates in the U.S. remain sufficiently positive to attract yield-seeking flows. With the U.S. economy slowing but not entering recession, the dollar continues to maintain relative strength against major currencies, including the yen."
"Japan, on the other hand, continues to show patience in normalizing monetary policy. According to the Bank of Japan, the policy meeting on 30 October 2025 resulted in a vote of 7-2 to keep the policy rate around 0.5%. Board members Hajime Takata and Naoki Tamura once again proposed raising rates to 0.75% but did not receive majority support. A meeting summary reported by Reuters noted that more policymakers now believe the conditions for rate hikes are gradually forming."
USDJPY is biased toward the U.S. dollar as the Fed and BoJ pursue divergent approaches, keeping interest-rate differentials wide and the yen weak. The pair trades near 154.5, close to multi-month highs. The Federal Reserve has implemented two cautious rate cuts, lowering the federal funds rate to 3.75–4.00%, while U.S. core inflation sits around 3% and the labour market is only beginning to cool, keeping real U.S. rates attractive. The Bank of Japan voted 7–2 to keep policy around 0.5%; some members prefer 0.75%, but Governor Ueda wants more time amid rising inflation and external pressures.
Read at London Business News | Londonlovesbusiness.com
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