The Japanese yen strengthened past 155.5 per dollar, extending gains from the previous week and reaching its highest level in nearly two weeks, supported by increasing expectations of a policy rate hike from the Bank of Japan. The swap market now prices in approximately a 62% probability of a rate increase at the central bank’s upcoming policy meeting on December 19, with the likelihood rising to nearly 90% by the January meeting. Expectations of a December rate hike have intensified following a 5% depreciation of the yen against the greenback this quarter, alongside persistent inflation exceeding the central bank’s 2% target. Externally, the yen received further support from the weakening US dollar, as markets now price in an 87% chance of a 25bps cut at the Fed’s policy meeting next week. Meanwhile, Japan’s manufacturing PMI was revised marginally downward to 48.7 in November 2025 from the preliminary estimate of 48.8, following a final reading of 48.2 in the previous month.