Japanese Yen sticks to strong intraday gains; USD/JPY seems vulnerable near 155.00

• The Japanese Yen kicks off the new week on a positive note amid rising BoJ rate hike bets.
• A softer risk tone further benefits the safe-haven JPY, while a dovish Fed weighs on the USD.
• Traders now look to this week’s important US macro releases and the BoJ policy meeting.

The Japanese Yen (JPY) sticks to its intraday gains through the early European session on Monday and seems poised to apprciate further amid hawkish Bank of Japan (BoJ) expectations. Against the backdrop of the recent shift in rhetoric from Bank of Japan (BoJ) Governor Kazuo Ueda, an improvement in business confidence reaffirms market bets for an imminent rate hike this week. Apart from this, a slight deterioration in the global risk sentiment turns out to be another factor underpinning the JPY's safe-haven status.

The aforementioned supporting factors, to a larger extent, offset concerns about Japan's deteriorating fiscal condition on the back of Prime Minister Sanae Takaichi's massive spending plan. The US Dollar (USD), on the other hand, languishes near a two-month low, touched last Thursday, amid rising bets for two more interest rate cuts by the Federal Reserve (Fed). This marks a significant divergence compared to hawkish BoJ expectations, which, in turn, validates the near-term positive outlook for the lower-yielding JPY.

Japanese Yen is underpinned by hawkish BoJ bets and safe-haven flows

• According to the Bank of Japan's quarterly Tankan survey released earlier this Monday, the business confidence index at large manufacturers in Japan rose to 15 in the fourth quarter of 2025 from 14.0 in the previous quarter. Further details revealed that the large Manufacturing Outlook arrived at 15.0 vs 12.0 prior.
• Commenting on the Tankan survey, a senior BoJ official said that Japanese firms cited easing uncertainty around US trade policy and resilient demand in high-tech sectors as key factors supporting business sentiment. Firms cited pass-through of costs and robust demand as factors brightening the business outlook.
• Moreover, BoJ Governor Kazuo Ueda recently said that the central bank is getting closer to attaining its inflation target. This reaffirms market bets for an imminent BoJ interest rate hike at the end of the December 18-19 policy meeting and backs the case for further policy tightening going into 2026.
• Moreover, reports suggest that top officials in Prime Minister Sanae Takaichi’s cabinet are unlikely to oppose a BoJ rate hike. Traders, however, seem reluctant to place bullish bets around the Japanese Yen and opt to wait for more cues about the BoJ's future policy path before positioning for further gains.
• Hence, the focus will remain glued to Ueda’s post-meeting press conference on Friday. In the meantime, Takaichi's massive spending plan has exacerbated concerns about Japan's public finances amid sluggish economic growth, which, in turn, is seen as another factor acting as a headwind for the JPY.
• The US Dollar, on the other hand, struggles to attract any meaningful buyers and languishes near a two-month low touched last Thursday amid dovish Federal Reserve expectations. The Fed signaled caution about further rate cuts, though traders are pricing in two more interest rate cuts next year.
• Meanwhile, US President Donald Trump said that he had narrowed the list of contenders to replace Jerome Powell as the next Fed chair and expects his nominee to deliver interest-rate cuts. The prospect of a Trump-aligned Fed chair keeps the USD bulls on the defensive and caps the USD/JPY pair.
• Traders also seem reluctant ahead of this week's important US macro releases – including the delayed Nonfarm Payrolls (NFP) report for October on Tuesday and the latest inflation figures on Thursday. In the meantime, the divergent BoJ-Fed outlooks might continue to support the lower-yielding JPY.

USD/JPY bears now await break below 155.00 before placing fresh bets

From a technical perspective, the USD/JPY pair has been struggling to move back above the 100-hour Simple Moving Average (SMA), and the subsequent slide favors bearish traders. However, positive oscillators on the daily chart suggest that any further decline is more likely to find decent support near the 155.00 psychological mark. A convincing break below the latter would turn spot prices vulnerable to accelerate the fall towards the monthly low, around the 154.35 area, en route to the 154.00 mark.

On the flip side, the 100-hour SMA, currently pegged at the 156.00 round figure, might continue to act as an immediate hurdle. Some follow-through buying beyond Friday's swing high, around the 156.10-156.15 region, might trigger a short-covering move and lift the USD/JPY pair to the 157.00 neighborhood. A sustained strength beyond the latter should pave the way for additional gains towards the 157.45 intermediate hurdle en route to a multi-month top, around the 158.00 neighborhood, touched in November.