USD/JPY retraces after BoJ rate hike boost – BBH

FXStreetDec 2, 2025 11:58 AM

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USD/JPY reversed most of yesterday’s dip as markets digested BoJ Governor Ueda’s hawkish comments boosting December rate hike expectations, BBH FX analysts report.

Rising JGB yields limit BoJ tightening capacity

"USD/JPY retraced most of yesterday’s undershoot triggered by Bank of Japan (BOJ) Governor Ueda juicing up December rate hike bets. Rising JGB yields is pushing up Japan’s debt servicing costs, limiting the BOJ tightening capacity and posing a headwind for JPY."

"We anticipate the sell-off in JGBs to stabilize on improving demand from investors. The 10-year bond sale's average bid-to-cover ratio was 3.59 vs. 2.97 in November and a 12-month average of 3.20. A 30-year bond auction is due on Thursday."

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