The Bank of Japan's December rate hike probability exceeds 80%, leading to a strengthening trend for the yen and RMB against the yen

Market Rate Hike Bets Surge, Yen Rebound Imminent

Market expectations for the Bank of Japan’s December rate hike are rapidly intensifying. According to the latest overnight index swap data, the probability of a rate increase in December has exceeded 80%. This reversal stems from recent comments by BOJ Governor Kazuo Ueda—he explicitly stated that he will weigh the pros and cons of a December hike and make a decision based on the situation, marking the strongest policy signal to date.

On December 1, USD/JPY( fell to 154.66, hitting a two-week low, reflecting widespread market optimism for yen appreciation. French bank economists directly stated that Ueda’s remarks “almost serve as a forecast for a December rate hike.” Barclays and JPMorgan Chase subsequently adjusted their expectations, moving the rate hike timeline from January next year to this month.

Disagreements Remain, Goldman Sachs Takes a Cautious Stance

Not all institutions are certain about a December rate hike. Goldman Sachs maintains a conservative view, believing that the BOJ may need more corporate wage data to support a decision and prefers to act in January next year. This perspective reflects differing internal market interpretations of the data timing.

Narrowing US-Japan Yield Spread Triggers Unwinding of Carry Trades

Meanwhile, expectations for a Fed rate cut are also high. The market generally bets that the probability of a Fed rate cut in December is close to 90%. The continuous narrowing of the US-Japan yield spread is rewriting market arbitrage logic—large-scale “carry trades”) borrowing yen to buy dollars( are entering the unwinding phase.

Coin Bureau analyst Nic Puckrin pointed out that “the sharp fluctuations in the yen exchange rate are once again disrupting trading patterns, and yen carry positions are accelerating their closure.” Lee Hardman, an analyst at Mitsubishi UFJ Financial Group, said that as rate hike expectations ferment, the yen’s appreciation trend is likely to continue. The institution forecasts that by early 2026, USD/JPY could fall toward the 150 level.

RMB/JPY May Experience a Linked Upward Movement

During the yen appreciation cycle, the RMB/JPY exchange rate also faces upward pressure. As the BOJ tightens its policy framework, the attractiveness of yen assets increases, while relatively high US-China interest rate differentials will continue to support the RMB. Analysts believe that the future trend of RMB/JPY will become an important window to observe the movement of Asian currencies.