Forex News: Yen Rises Amid BoJ Rate Hike Bets

Yen Rises Amid BoJ Rate Hike Bets

(RTTNews) - The Japanese yen strengthened against other major currencies in the European session on Monday, as traders speculate that the Bank of Japan or the BoJ is likely to raise its interest rate in the policy meeting held this week.

Traders await next week's BoJ meeting where a 25bps rate hike is widely expected.

Market predictions for an impending rate hike this week are reinforced by an increase in business confidence.

Data from the Bank of Japan's quarterly Tankan Survey of business sentiment showed that the large manufacturing in Japan accelerated slightly in the fourth quarter of 2025, with a diffusion index score of +15. That was in line with forecasts and was up from +14 in the previous three months.

The outlook also came in at +15, matching forecasts and up from +12 in the previous quarter.

The large non-manufacturers index came in at +34, beating forecasts for +33 and unchanged from Q2. The outlook was steady at +28.

The small manufacturing index jumped to +6 from +1, while the outlook rose to +2 from -1.

The small non-manufacturing index ticked up to +15 from +14, while the outlook was steady at +10.

Large industry capex is seen higher by 12.6 percent, up from 12.5 percent in Q3. Small industry capex was up 0.1 percent after sinking 2.3 percent in the three months prior.

Additionally, BoJ Governor Kazuo Ueda recently stated that the central bank is nearing its inflation target. This supports the argument for more policy tightening through 2026 and confirms market projections for an impending BoJ interest rate hike at the conclusion of the December 18-19 policy meeting.

Concerns about Japan's worsening fiscal situation due to Prime Minister Sanae Takaichi's big spending plan were mostly mitigated by the previously mentioned supporting factors. According to reports, senior cabinet members of Prime Minister Sanae Takaichi are unlikely to be against a BoJ rate increase.

In the European trading today, the yen rose to a 6-day high of 181.84 against the euro and a 1-week high of 207.10 against the pound, from early lows of 183.01 and 208.45, respectively. If the yen extends its uptrend, it is likely to find resistance around 178.00 against the euro and 204.00 against the pound.

Against the U.S. dollar and the Swiss franc, the yen advanced to a 4-day high of 154.95 and a 5-day high of 194.50 from early lows of 155.99 and 195.83, respectively. The yen may test resistance around 153.00 against the greenback and 191.00 against the franc.

Against the Australia and the Canadian dollars, the yen climbed to a 1-week high of 102.98 and a 4-day high of 112.57 from early lows of 103.68 and 113.30, respectively. On the upside, 100.00 against the aussie and 109.00 against the kiwi are seen as the next resistance levels for the yen.

Looking ahead, Canada housing starts for November, CPI data for November, manufacturing sales data for October, U.S. NY Empire State manufacturing index for December and U.S. NAHB housing market index for December are slated for release in the New York session.

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