Japanese Yen bulls have the upper hand amid December BoJ rate hike bets

Tokyo November Consumer Price Index (CPI) released last week suggested that the underlying inflation is gaining momentum and lifted expectations for a December rate hike by the Bank of Japan. 

BoJ Governor Kazuo Ueda said on Saturday that the central bank will adjust the degree of monetary easing at the appropriate time if it becomes confident that the underlying inflation rises toward 2%.

Russia fires at least 60 North Korean missiles against Ukraine. North Korean leader Kim Jong Un vowed that his country will invariably support Moscow until Russia achieves a great victory in Ukraine.

US President-elect Donald Trump has pledged to impose big tariffs against America’s three biggest trading partners and 'BRICS' nations, raising the risk of a second wave of a global trade war. 

Investors remain concerned that Trump's tariff plans and expansionary policies will reignite inflationary pressures and force the Federal Reserve to stop cutting rates or possibly raise them again. 

The Institute of Supply Management's (ISM) Manufacturing Purchasing Managers Index (PMI) rose to 48.4 in November amid hopes of business-friendly policies from the Trump administration.

According to the CME Group's FedWatch Tool, traders are currently pricing in a nearly 75% chance that the US central bank will lower borrowing costs again by 25 basis points later this month. 

The benchmark 10-year US Treasury bond yield had fallen to its lowest levels since late October, narrowing the US-Japan yield differential, which should also benefit the lower-yielding Japanese Yen.

Investors keenly await important US macro releases scheduled at the beginning of a new month for more cues about the Fed's future rate-cut path, which will influence the USD and the USD/JPY pair.