USD/JPY declines as Yen strengthens on BoJ hike bets and weak US jobs data

• USD/JPY slips as the US Dollar stays on the back foot after delayed US jobs data.
• BoJ rate-hike expectations underpin the Yen ahead of Friday’s interest rate decision.
• Markets await US CPI data for clues on the Fed’s policy path into 2026.

The Japanese Yen (JPY) strengthens against the US Dollar (USD) on Tuesday as the Greenback remains on the back foot following the release of the delayed October and November Nonfarm Payrolls (NFP) reports.

At the time of writing, USD/JPY is trading around 154.64, down about 0.40% on the day, while expectations of a Bank of Japan (BoJ) rate hike later this week continue to keep the Yen broadly supported.

Data from the US Bureau of Labor Statistics (BLS) showed that the US economy added 64,000 jobs in November, slightly above market expectations for a 50,000 increase. October payrolls fell by 105,000, sharply reversing September’s 108,000 increase, which was also revised down from 119,000.

The Unemployment Rate rose to 4.6% in November, above market expectations of 4.4% and marking its highest level since September 2021.

Average Hourly Earnings rose just 0.1% MoM in November, missing market expectations for a 0.3% increase, while annual wage growth slowed to 3.5% from 3.7%. In October, earnings increased 0.4% on the month, up from 0.2%, while yearly wage growth eased to 3.7% from 3.8%.

Overall, the employment data suggest that the US labour market is continuing to cool. While November’s payroll gain came in slightly better than expected, the broader picture remains soft, with slower job creation, rising unemployment and easing wage growth.

However, the data did little to shift expectations for the January FOMC meeting, where investors largely anticipate the Fed to hold rates steady. Market attention now turns to the November Consumer Price Index (CPI) data due on Thursday for further clues on the Fed’s monetary policy path into 2026, with markets currently pricing in two rate cuts.

In Japan, attention is now firmly on the Bank of Japan’s policy decision due on Friday, where the central bank is widely expected to raise its policy rate to 0.75%, which would mark the highest level in more than three decades. With the move largely priced in, market focus is likely to shift to Governor Kazuo Ueda’s guidance on the timing and extent of further rate hikes. On Wednesday, Japan’s economic calendar features the November trade data, including the Adjusted Merchandise Trade Balance, Exports and Imports.