USD/JPY Price Forecast: Yen Slides to 148.50 as BOJ Holds Back, Fed Cuts Loom

USD/JPY Faces Policy Divergence as BOJ Holds Back and Dollar Recovers

The yen weakened further after Bank of Japan Deputy Governor Ryozo Himino suggested the central bank will not rush into rate hikes, keeping the policy rate at 0.5% while inflation eases from 4% earlier this year to 3.1% in July, nearing the 2% target. The BOJ’s wait-and-see stance contrasts with earlier market expectations of imminent tightening, and this shift has reduced demand for Japanese bonds, weighing on the currency. Caution is also driven by U.S. tariff risks, which Himino highlighted as a potential drag on Japan’s fragile growth.

Dollar Index Recovery Adds Pressure on USD/JPY

The U.S. dollar regained strength after the Labor Day break, with the DXY climbing back above 98, posting a 0.2% intraday gain. The rebound followed several flat sessions, restoring buying pressure against major peers. This move has kept USD/JPY pinned higher, with spot prices climbing into the 148.00–148.50 range, near a multi-day high. If the DXY continues its upward slope, the yen may remain under pressure in the near term.

USD/JPY Technical Structure Points to Critical Levels

Price action in USD/JPY (JPY=X) has been locked in a wide sideways channel since April, with strong resistance at 148.493 and support around 141.205. The pair has recently carved out higher lows, hinting at a developing bullish trendline. A breakout above 148.493, which coincides with the 200-period SMA, could push toward 150.00–150.679, the top seen in recent weeks. The RSI remains above 50, reinforcing renewed bullish momentum, while the ADX, still under 20 but rising, signals growing volatility. On the downside, 147.038, aligned with the 50-period SMA and Ichimoku cloud, is the near-term support. A decisive break below would reintroduce selling pressure and risk a move back toward 146.20–146.00.

Fed Policy Outlook and Key U.S. Data to Drive Moves

Markets are pricing a nearly 90% chance of a 25 bps Fed cut in September, with expectations of at least two reductions before year-end. This contrasts sharply with the BOJ’s cautious normalization, underscoring policy divergence as a core driver of USD/JPY. Traders are watching a packed U.S. calendar: ISM Manufacturing PMI, JOLTS job openings, ADP employment, and Nonfarm Payrolls on Friday. Consensus sees payroll gains of 75,000 and unemployment ticking up to 4.3%, the highest since November 2021. A weak print could reinforce bets for deeper Fed easing, while stronger data may cap USD downside, keeping USD/JPY elevated.

Geopolitics and Safe-Haven Dynamics Shape Sentiment

The yen’s traditional safe-haven role has been undermined by stronger Asian equities, including a sharp rally in China’s CSI 300, which reduced defensive flows. At the same time, political friction in the U.S. has raised concerns over Fed independence after President Trump’s attempted reshuffle of the Fed board. Treasury Secretary Scott Bessent defended Trump’s actions, but markets remain wary that U.S. institutions could face pressure. This backdrop injects volatility into the dollar and indirectly impacts USD/JPY positioning, with traders cautious about sudden swings.

Market Balance Between Fed Cuts and BOJ Patience

Capital spending in Japan showed a rebound in Q2, signaling potential support for labor markets and demand-led inflation. This keeps a BOJ hike in play later this year or early next, though timing remains uncertain. Meanwhile, the Fed leans toward easing, widening the yield spread in favor of the dollar. If the Fed delivers the expected September cut while BOJ remains on hold, USD/JPY could retest 150.00 quickly. But if U.S. data surprises strongly, the probability of aggressive Fed easing may fade, providing the yen a temporary floor.

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