Since the beginning of 2025, JPY has continued to strengthen, causing the USD/JPY to drop by over 5%.
Two key factors are driving this trend: growing market expectations for a Bank of Japan (BOJ) rate hike and rising geopolitical risks boosting safe-haven demand.
Overnight Index Swap data shows an 85% probability of a BOJ rate hike in July, with some investors even betting on a hike as early as May.

[Source: TradingView; USD/JPY over the past 3 Months]
Market views on the yen’s future remain mixed. Maki Ogawa, Chief Analyst at Sony Financial Group, believes there is no strong, sustained buying force for the yen, making its recent gains unsustainable.
Meanwhile, Yuya Yokota, a foreign exchange trader at Mitsubishi UFJ Trust Bank, notes that while BOJ rate hike expectations support the yen, they may be offset by concerns over potential U.S. tariffs on Japan.
Yokota expects the USD/JPY to fluctuate between 148 and 155 in the short term, with a possible decline to 140 in the long term if wage growth supports further BOJ rate hikes.