The Japanese yen extended its decline, with USD/JPY climbing past the mid-153.00s, driven by persistent dollar strength and diverging monetary policy expectations. The yen remains under heavy selling pressure as the Federal Reserve’s hawkish stance reinforces demand for the greenback, while the Bank of Japan sticks to its ultra-loose policy.
The Fed’s commitment to maintaining higher interest rates for longer has fueled a broad rally in the dollar. Recent U.S. economic data, including solid labor market performance and sticky inflation, has tempered expectations of near-term rate cuts. With Treasury yields staying elevated, investors continue to favor dollar-denominated assets, further weighing on the yen.
USD/JPY 1-D Chart as of February 12th, 2025 (Source: TradingView)
Meanwhile, the Bank of Japan’s cautious approach has done little to support the currency. Despite speculation about a shift away from negative interest rates, the central bank has provided no clear timeline for tightening policy. With inflationary pressures in Japan moderating, markets remain skeptical about the BoJ’s ability to act aggressively, leaving the yen vulnerable.
Geopolitical uncertainty and risk sentiment have also played a role in accelerating yen weakness. As global markets remain volatile, investors are moving toward safer assets, including the dollar, while the yen—historically a safe haven—continues to lose appeal due to Japan’s low-yield environment.
Looking ahead, traders are watching key U.S. data releases and any signals from the BoJ regarding potential policy adjustments. A continued USD/JPY rally beyond 154.00 could invite intervention from Japanese authorities, who have previously warned against excessive currency depreciation. For now, the dollar’s dominance keeps the yen firmly on the back foot.
