Published: 12 December 2025,03:01
Daily Market Analysis New
*JPY initially supported by Bank of Japan (BoJ) rate-hike expectations.
*Record lows versus offshore yuan raise concerns about imported inflation.
*Economists largely expect a 25bps BoJ hike at the December 18–19 meeting.
The Japanese yen started November and December on a bullish footing, buoyed by expectations that the Bank of Japan will raise short-term interest rates by 25 basis points to 0.75% at its upcoming December 18–19 policy meeting. According to a Reuters poll conducted December 2–9, 90% of economists—63 out of 70 respondents—now expect the BoJ to implement a rate hike, up sharply from 53% in last month’s survey.
Despite these hawkish signals, the yen has struggled to sustain gains amid rising geopolitical tensions between Japan and China, which may weigh on economic growth and investor sentiment. The currency recently hit a record low against the offshore Chinese yuan, highlighting growing concerns over imported inflation at a time when BoJ policy normalization remains gradual.
The yen’s weakness extends beyond the dollar and euro, encompassing key trading partners such as China and Australia, reflecting the broader strain on Japan’s currency. Analysts note that Japan’s real effective exchange rate remains near multi-decade lows, which could amplify inflationary pressures from imports, especially given China’s role as the nation’s largest source of imported goods.
Market participants are closely watching the BoJ’s policy statement for guidance on the pace of future rate hikes. While monetary tightening expectations have supported the yen, lingering fiscal concerns and regional uncertainties continue to cap upside potential.
USD/JPY remains under pressure following its retracement from resistance, with the overall trend staying bearish after breaking the upward trendline. Support at 154.60 is a key level to watch. A confirmed break below this level could push the pair toward 152.80, continuing the downtrend.
Conversely, if bearish momentum fails to hold, USD/JPY could rebound to 156.95, with the next resistance at 158.15, offering a potential short-term corrective move within the broader bearish structure.
Resistance Levels: 156.95, 158.15
Support Levels: 154.60, 152.80
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