Yen Holds Firm as Dollar Retreats Ahead of BoJ Decision

The U.S. Dollar slipped against the Japanese Yen on Tuesday evening, with the pair trading near 154.73, down about 0.30% on the day. The move reflects a combination of softer U.S. labor market signals and heightened anticipation of a Bank of Japan rate hike later this week.

Over the past five days, the Dollar has lost nearly 0.8% against the Yen, though the longer-term picture remains more complex: the pair is still up more than 6% over six months, underscoring how resilient the Dollar has been despite recent setbacks.

The immediate pressure comes from expectations that the Bank of Japan may raise interest rates to levels not seen in decades, a shift that would mark a historic departure from its ultra-loose monetary stance. Investors are watching closely for guidance on how far and how fast the BoJ might tighten policy.

On the U.S. side, the latest jobs data showed slower hiring, rising unemployment, and weaker wage growth. While November payrolls came in slightly better than expected, the broader trend points to a cooling labor market. This has reinforced the view that the Federal Reserve is likely to hold rates steady in January, with markets already pricing in potential cuts later in 2026.

The day’s trading range for USD/JPY stretched between 154.39 and 155.24, reflecting cautious sentiment as investors await Thursday’s U.S. inflation figures and Friday’s BoJ announcement.

Broader Context

– Short-term trend: Dollar under pressure, Yen supported by rate hike bets.

– Medium-term trend: Despite recent declines, USD/JPY remains higher compared to mid-year levels.

– Global impact: A BoJ hike could ripple across global markets, challenging long-held assumptions about Japan’s role as a source of cheap funding.

In essence, the Yen’s strength is not just about numbers on a chart—it signals a potential turning point in global monetary dynamics, as Japan edges away from decades of near-zero rates while the U.S. economy shows signs of fatigue.