Yesterday Wednesday (December 4th), the USD/JPY surged nearly 100 points. The market's expectation for the Bank of Japan to raise interest rates this month has significantly decreased, as a previous report by Japanese media raised doubts about the Bank of Japan's rate hike this month, putting pressure on the yen.

(Screenshot source: Bloomberg)

The Japanese yen exchange rate is still below the key 1 US dollar to 150 Japanese yen, with a drop of up to 1.1% in intraday trading on Wednesday.

The USD/JPY closed up 96 points, or 0.64%, at 150.53 on Wednesday.

Overnight index swap trading shows that the possibility of the Bank of Japan raising interest rates at its meeting on December 18-19 is only 40%, which has significantly decreased from 66% on November 29.

(Screenshot source: Bloomberg)

A report from Jiji Press on Wednesday stated that an increasing number of people within the Bank of Japan believe that premature interest rate hikes should be avoided unless there is a significant risk of consumer price increases due to factors such as the depreciation of the yen.

This is in stark contrast to the remarks made by Bank of Japan Governor Kazuo Ueda in an interview with Nikkei News.

Kazuo Ueda stated in an interview that interest rate hikes are "approaching" as inflation and economic trends align with the central bank's predictions.

Mizuho Securities Co. senior market economist Yusuke Matsuo mentioned the report from the Japanese news agency in a report.

Matsuo wrote, "If the Bank of Japan intends to release this information, it may be trying to prevent people from misunderstanding that it has decided to raise interest rates at its December meeting

Due to the uncertain policy outlook of the Federal Reserve, the huge interest rate differential between Japan and other economies may keep the yen weak.

Investors will closely monitor the speech and press conference of Bank of Japan board member Toyoaki Nakamura on Thursday, seeking further hints about monetary policy and the trend of the US dollar/Japanese yen.

Yujiro Goto, head of foreign exchange strategy at Nomura Securities Co., wrote in a report: "The dovish board member's speech was made today, so expectations for the Bank of Japan's interest rate hike are unlikely to rise