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USD/JPY remains caught in near-term congestion just north of the 156.00 handle during the final week of 2025’s trading year. Yen traders are battling headwinds on multiple fronts, with the Bank of Japan (BoJ) carrying much of the vexation risk for Yen markets.

The BoJ broke away from the pack as the only central bank raising interest rates heading into the end of the year after delivering another quarter-point interest rate hike on December 19. Further rate hikes. The current cash rate from the BoJ currently sits at a three-decade peak of 0.75%.

Even with climbing Japanese interest rates, the world’s favorite funding currency remains unable to find meaningful strength. The Dollar-Yen pair has risen nearly 12% from its annual low of 139.89 set in April, and is set to end 2025 close to where it began, near technical levels that have sparked previous currency market interventions from the BoJ.

Fed sees more cuts, but only if data plays ball
 

The latest Meeting Minutes from the Federal Reserve (Fed) show Federal Open Market Committee (FOMC) members are cautiously tilted toward the dovish side, with the majority of policymakers expecting further rate cuts in the future; however, the pace of future rate cuts remains contingent on several factors, specifically that US inflation metrics continue to ease lower.

Quality of American inflation data remains a concern for both investors and central bankers: despite a steep cooling in headline Consumer Price Index (CPI) inflation data at the last print, investors noted that the underlying data was missing several key components, and a large swath of the data that was present involved a high degree of assumptions and carry-forward estimates due to large chunks of missing price information. Even if headline inflation ticket figures continue to ease lower, a lack of accurate measurement will keep both FOMC votes and trader expectations on the back foot.

USD/JPY daily chart
 

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