BOJ’s Ueda signals rate hike coming, yen steady

Japan’s financial markets opened for the first time in 2025 on Monday. USD/JPY dropped as much as 0.50% but has recovered most of these losses. In the North American session, USD/JPY is currently trading at 157.50, up 0.14% on the day. There are no tier-1 events out of Japan on today’s economic calendar.

Bank of Japan Governor Ueda said earlier today that the central bank would raise interest rates if “economic and price conditions continue to improve”. Ueda said that timing of a hike would depend on “various risks”. In December, Ueda highlighted uncertainty over the incoming Trump administration and weak wage growth as reasons why the Bank was not in a rush to raise rates.

Ueda’s comments didn’t provide any insights about the timing of a rate hike but it is significant that he is signaled in today’s comments that a rate hike appears to be a given, barring some unexpected negative development. The BoJ could raise rates at the Jan. 23-24 meeting but might decide to wait until March or even later.

The BoJ tends not to telegraph its intentions ahead of time, with the result that rate moves are usually a surprise and often trigger sharp swings in the yen. The BoJ is concerned about the yen’s sharp depreciation, with the yen sliding 10.5% since October 1. Tokyo has issued verbal warnings about concern over the yen, but that isn’t likely to have much effect. The BoJ could intervene on the currency markets to prop up the yen, and that extreme move should always be in the mind of traders and investors, with the yen trading close to 6-month lows.

In the US, Services PMI for December was revised  lower to 56.8 from a preliminary 58.5, but this was above 56.1 in November and was the strongest level since March 2022. This points to a robust service sector which is carrying the strong US economy.

USD/JPY Technical

• USD/JPY is testing resistance at 157.64. Above there is resistance at 158.66
• There is support at 156.94 and 155.92

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