How the Bank of Japan Is Killing the Yen

GBP/JPY

Key zone: 202.00- 203.50

Buy: 203.50 (on a pullback after retesting the 203.00 level); target 205.00; StopLoss 202.80

Sell: 202.00 (on strong negative fundamentals) ; target 200.50-200.00; StopLoss 202.70

Uncertainty in the Bank of Japan’s monetary policy continues to frighten yen buyers. The Prime Minister of Japan stated that with “wrong” policy decisions and disagreements within the BOJ leadership, the country could once again slip into deflation, and this statement only intensified pressure on the currency.

On Monday, the Bank of Japan released a rare public document — the “Summary of Opinions”, which revealed serious disagreements within the board regarding the timing of rate hikes. Board member Nakagawa emphasized that the regulator would maintain a cautious approach in its decisions, avoiding abrupt moves.

The discussion is complicated by the government’s new administrative measures and their potential impact on the economy and inflation. Meanwhile, Prime Minister Sanae Takaichi, known for her dovish stance, is increasing pressure on the Bank of Japan, limiting its room for tightening.

Some board members believe that the rise in U.S. tariffs and wage growth in Japanese corporations could affect the timeline for policy normalization.

Markets interpreted these remarks as a signal of a possible delay in rate hikes.

At the same time, a new stimulus program aimed at supporting domestic demand is being discussed, further strengthening the position of those favoring a weak yen.

Investors also point out high uncertainty surrounding currency interventions intended to curb yen depreciation — this uncertainty keeps markets in cautious neutrality.

Fresh data indicate a decline in domestic demand, which could temporarily restrain inflation; however, the weak yen raises import costs and contributes to higher consumer prices.

On Tuesday, the Japanese Ministry of Economy acknowledged that inflation is undermining consumer purchasing power and promised to take measures to mitigate the effects of rising prices.

Asian markets traded quietly on Tuesday: investors preferred a wait-and-see stance amid unclear rate prospects. The U.S. dollar remains stable, supported by expectations of the U.S. budget crisis resolution.

Uncertainty surrounding Trump’s tariffs, which are being reviewed by the U.S. Supreme Court, has also negatively affected the yen, which continues to fall not only against the dollar but also across major cross-pairs.

With more than a month remaining before the December BOJ meeting, markets expect no decisive action from the regulator.

Once again, the Bank of Japan has become a hostage to its own strategy: caution turns into weakness, and weakness becomes fuel for the yen’s continued decline.

Against the backdrop of political uncertainty and global expectations of a Fed rate cut, the only factor that could restrain further growth in the USD/JPY pair remains the anticipation of a dovish Federal Reserve policy.

So we act wisely and avoid unnecessary risks.

Profits to y’all!