Japanese Yen Extends Losses as USD/JPY Rises on Yield Gap
The Japanese Yen Continues to Fall
By IFCCI News Desk
Data verified and updated as of November 2025
The Japanese yen extended its downward trajectory this week, weakening further against the US dollar as divergent monetary policy paths between the Federal Reserve and the Bank of Japan (BoJ) continued to dominate global currency markets.
The USD/JPY pair advanced steadily, with traders citing persistent yield differentials as the core driver behind the yen’s depreciation. While the Federal Reserve has already delivered a series of rate cuts in 2025, US Treasury yields remain elevated relative to Japanese government bonds, sustaining capital outflows from Japan toward higher-yielding markets.
Analysts note that despite tentative steps toward policy normalisation earlier in the year, the BoJ has maintained a cautious stance. Market participants say the central bank remains reluctant to tighten financial conditions aggressively amid uneven domestic inflation trends and concerns over weakening household consumption.
The yen’s ongoing softness has also been reinforced by Japan’s widening trade dynamics. Recent data showed rising import costs, particularly in energy and raw materials, while export gains have been inconsistent, limiting support for the currency. Traders further highlighted that global investors continue to use the yen as a funding currency in carry trades, adding pressure during risk-on market phases.
Some foreign-exchange strategists warn that the currency may face additional downside risks if global yields remain firm or if the BoJ refrains from signalling clearer policy direction. Others argue that intervention risks are rising, with speculation intensifying over whether authorities may consider stepping in should volatility accelerate.
For now, markets are closely watching upcoming BoJ communications, inflation releases, and US economic data for further clues on the USD/JPY outlook. Volatility is expected to remain contained but directional bias continues to favour yen weakness unless policy dynamics meaningfully shift.
