Created on January 22, 2026

The market has clearly spoken that it does not like the rising interest rates in Japan, as traders continue to punish the bond markets in Tokyo.

The US dollar has gone back and forth against the Japanese yen during trading on Wednesday as we continue to see a lot of choppiness right around this 158 yen level. It does make a certain amount of sense because we have the Bank of Japan interest rate decision happening on Friday, and that obviously will have a lot to do with where we go next.

While a cut or a hike isn’t necessarily expected, what people will be watching is the statement and the press conference. The Japanese are painted into a corner as they offer 75 basis points interest, but quite frankly, their bond market is starting to get out of control, and a lot of that comes down to the debt.

The market has clearly spoken that it does not like the interest rates rising in Japan and therefore continues to punish Japan via its bond market. If the central bank starts to talk about quantitative easing again, that probably helps the bond market but crushes the yen.

Interest Rate Differential

The interest rate differential, even after the Fed cuts a total of 50 basis points this year as expected, is still wide enough to drive a truck through, and therefore, you get paid at the end of every day to hold this currency pair. I think that continues to be one of the main drivers.

The 50-day EMA is down at the 156.11 level, and I think it is going to continue to offer a bit of a floor in the market. I like buying dips. I’ve been hanging on to this one for a while, adding occasionally, and building up a sizeable position that pays me at the end of every day. That’s how I think this continues. 160 yen will be the next target.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.