Yen Weaker as Bank of Japan Sticks to Cautious Stance on Further Rate Hikes, Says Mitsubishi UFG

06:38 AM EDT, 10/30/2025 (MT Newswires) -- The yen (JPY) has continued to weaken against the US dollar (USD) overnight Wednesday following the Bank of Japan's latest policy meeting, which has contributed to a broad-based yen sell-off as well, said MUFG.

It has helped to lift USD/JPY above the high from Oct. 10 at 153.27, thereby opening the door to further upside in the near-term, wrote the bank in a note to clients. The next important resistance level is located closer to the 155.00 level.

Yen selling momentum has been reinforced by the BoJ's decision to leave rates on hold at 0.50%, stated MUFGthat . The voting pattern was similar to at the previous meeting with only two hawkish dissents from BoJ members Naoki Tamura and Hajime Takata, who favored a 25bps rate hike. The BoJ's updated economic projections were little changed, supporting its decision to leave rates on hold this week.

In the press conference, BoJ Governor Kazuo Ueda maintained a cautious stance over the outlook for further rate hikes. He reiterated that the BoJ plans to raise rates further if the economic outlook is met, but stressed that uncertainty remains high. The likelihood of the BoJ's economic outlook being realized is judged as "rising gradually."

The governor indicated that the BoJ wants to examine a little more about wage growth prospects in Japan, and needs to see more on firms' wage-setting amid the impact from higher tariffs, especially in the manufacturing sector for autos. Kazuo believes that there isn'tt enough material yet to predict the results from the next wage talks.

The BoJ is gathering data through branch manager meetings and other means as it closely watches for any evidence of wage divergence by firm size and region. He did clarify, though, that the BoJ is prepared to hike rates before the wage negotiation results are finalized, and just wants to see initial wage growth momentum, pointed ut MUFG.

Governor Ueda also emphasized that if convinced, the BoJ will adjust rates regardless of politics, although he stressed he plans to work closely with the new government. It follows a recent post from United States Treasury Secretary Scott Bessent calling on the new government to allow room for the BoJ to continue to normalize policy.

The comments support the bank's view that the BoJ will continue to raise rates gradually under the new Prime Minister Sanae Takaichi. However, the BoJ's policy update overnight indicates that it is in no immediate rush to resume rate hikes, encouraging a weaker yen.

The probability of a rate hike by December is currently priced at around 50:50 despite no strong signal at this week's meeting, added MUFG.

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