Why is the Japanese Yen gaining despite strong US jobs data?

Selling pressure takes USD/JPY towards 158.25 in early Asian trade on Monday.
A readiness among policymakers to quicken monetary tightening emerged from the BoJ meeting minutes.
October US NFP increased by 165,000, while the Unemployment Rate declined to 4.1%.

The Japanese Yen (JPY) gains modestly against the US Dollar (USD), pushing USD/JPY down towards 158.25 in Monday’s early Asian trading. Supporting the Yen, Bank of Japan (BOJ) meeting minutes signal that policymakers are ready to step up the pace of monetary tightening.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Expectations of a December rate increase strengthened after the BoJ left rates unchanged last month while underlining its determination to tackle inflation risks. Minutes of the September meeting, published on Thursday, showed that most BoJ policymakers considered additional rate increases appropriate as underlying inflation moved closer to the central bank’s 2% target.

Former BoJ top economist Seisaku Kameda said on Friday that the central bank was expected to increase interest rates in December, then continue raising borrowing costs next year until they reach 2% to counter growing inflationary pressures.

October’s US Nonfarm Payrolls (NFP) increase of 165,000 substantially exceeded the forecast gain of 65,000, according to figures released on Friday by the US Bureau of Labor Statistics (BLS). This followed a rise of 60,000 in September. Meanwhile, the US Unemployment Rate eased from 4.2% in September to 4.1% in October.

A December interest rate increase by the Federal Reserve (Fed) remains on course following the stronger-than-forecast US employment report. Kathy Bostjancic, chief economist at Nationwide, said: "The labor market is heating up across-the-board and supports our view that the Fed will raise the policy rate again in December,"

Following the US jobs release, financial markets assigned roughly a 79.6% probability to a rate increase at the US central bank’s meeting next month, compared with 72.8% beforehand, according to the CME FedWatch tool.

How are haven demand and BoJ normalisation expectations supporting the Yen?

During the latest wave of risk aversion, ABN Amro strategists observed that “haven demand favoured the JPY over the USD”. In their assessment, the “DXY Index was unchanged at 101.6 despite the equity rout, as falling US yields eroded the greenback’s appeal.” The Yen, by comparison, benefited from both domestic policy signals and safe-haven buying. As ABN Amro noted, “the JPY appreciated by 0.5% to 157.70 per USD, underpinned by the Bank of Japan minutes, which reinforced expectations of further normalisation.”

Does Daly’s inflation focus strengthen the Fed’s hawkish bias?

A stronger emphasis on tightening risks marks Fed’s Daly’s latest remarks, with her FXS Speechtracker score reaching 8/10 against the established baseline of 6.4/10. Her tone is notably more hawkish: although the employment report is “good news” and wage growth “isn’t booming,” real wages are declining and inflation has remained “high for too long,” making it the number 1 priority. These remarks support further policy tightening even with a resilient labour market. By stressing that labour market strength leaves the Fed room to act, while signalling a willingness to raise rates if warranted, Daly reinforces a firmer bias for the DOLLAR and puts risk assets on alert.

An increase of 0.95 points took the FXS Fed Sentiment Index to 143.10, comfortably above the neutral threshold of 100. The reading confirms a firmly hawkish stance consistent with the elevated FXS Speechtracker score. Although uncertainties over tariffs, war and AI are acknowledged, the principal market message is that the Fed continues to favour further tightening. That policy backdrop should keep supporting the DOLLAR against the EURO and YEN.

Technical Analysis: Can USD/JPY break above the 100-day SMA?

Range-bound trading remains the broad signal on the USD/JPY daily chart, where the pair sits just below the 100-day Simple Moving Average (SMA) and above the Bollinger Bands’ middle line. Overhead resistance from the upper Bollinger Band and the 100-day SMA constrains prices. At 52.93, the Relative Strength Index (14) points to mildly positive momentum without a clear directional trend.

For a more decisive bullish move to resume, USD/JPY would need a daily close above the 100-day SMA at 159.05, beyond the immediate resistance near the upper Bollinger Band at 158.95. Initial support lies at the middle Bollinger Band of 157.95, followed by a firmer floor around the lower band at 156.95. A breach of that lower boundary would turn attention to a broader corrective phase for the pair.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Japanese Yen: Common Questions

Which factors influence the Japanese Yen most?

Among the most actively traded currencies globally, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why do Bank of Japan decisions matter for the Japanese Yen?

Currency control forms part of the Bank of Japan’s mandate, making its actions an important influence on the Yen. On occasion, the BoJ has intervened directly in currency markets, usually to weaken the currency. Such interventions remain infrequent, however, because of political concerns among Japan’s main trading partners. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy weakened the Yen against its major peers as the policy gap with other leading central banks widened. The gradual withdrawal of that exceptionally loose policy has more recently lent the Yen some support.

Why does the US-Japan bond yield gap affect the Japanese Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ moved further apart from other central banks, especially the US Federal Reserve. The resulting widening in the yield gap between 10-year US and Japanese bonds favoured the US Dollar over the Japanese Yen. That differential is now narrowing as the BoJ’s 2024 decision to phase out its ultra-loose policy combines with interest rate reductions by other major central banks.

Why does wider market risk sentiment influence the Japanese Yen?

Investors often regard the Japanese Yen as a safe-haven asset, making them more inclined to move money into it when markets come under stress. This preference reflects the currency’s perceived reliability and stability. Consequently, periods of turbulence are likely to lift the Yen against currencies considered riskier investments.