The monetary policies of both the Japanese and U.S.
central banks are set to support USD/JPY throughout 2025 when the pair may exceed this year's high.

If current expectations are met, the interest rate differential underpinning USD/JPY will still be 3% at the end of next year.
The balance sheet of Japan's central bank will still be growing as that for the Federal Reserve stays unchanged or perhaps shrinks further.

This potent force could boost USD/JPY towards the target for a minor correction of the drop from 357 towards 75 which unfolded over four decades between 1971 and 2011 at 183.30.

Although the target is still far off, it is certainly looking more achievable following a leap from around 127 at the beginning of 2023 towards 162 this year.
Much of that gain has been retained with USD/JPY ending this year around 157 and traders now betting on a drop.

With no speculation against the yen, and fewer shorts linked to carry trades to restrain any drop, that far off target may be reached during a period of heightened demand for dollars which stems from a trade dispute between the United States and China.

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