USD/JPY Rockets Over 144—Can the Rally Survive BoJ Surprises and Fresh Inflation Risks?

usd/jpy momentum shifts as yen retreats on lower yields and policy uncertainty

Risk sentiment has dominated the start of the week, sending safe-haven plays lower as the US dollar regains its footing, now up over 1.1% versus the yen and trading around 144.00 after setting a four-week high near 142.11. The surge is underpinned by a combination of Japan’s Ministry of Finance floating a reduction in long-end bond issuance—which drove yields down and dragged the yen with them—and a sharp intraday rally following hawkish comments from BoJ Governor Ueda on inflation risks. Ueda specifically cited surging food costs as a threat to the central bank’s 2% inflation goal, warning that persistent core CPI above 3.5% demands vigilance. Markets see the BoJ holding rates steady for now, with a slim majority of economists expecting a hike only by year-end, even as services PPI hit 3.1% in April.

inflation pressures and central bank divergence shape usd/jpy direction

The yen’s selloff has come despite a backdrop of sticky inflation in Japan—core CPI hitting its highest mark in nearly two years at 3.5%, and services sector price growth running hot. This data normally boosts the case for further BoJ tightening, yet bond market moves and comments from Finance Minister Kato about closely watching yield volatility spooked Japanese investors. When super-long JGB yields fell, Japanese capital chased higher returns abroad, sending USD/JPY soaring as funds rotated into US Treasuries and equities. Meanwhile, the dollar itself is benefiting from improving risk appetite, climbing 0.81% against the yen today, and rising against every other major except the franc. While the DXY index remains below 100, the greenback’s relative strength has capped any further yen rallies, despite lingering concerns over US fiscal expansion and budget deficit blowouts from recent tax and spending bills.

geopolitics, tariffs, and global risk keep yen volatility high

Fresh volatility comes from the global stage, with President Trump’s deferral of 50% EU tariffs to July 9 offering near-term relief but leaving traders on edge about further protectionist shocks. The yen continues to find support on major geopolitical flashpoints—Israel’s escalation in Gaza, new US threats of sanctions against Russia after a massive Ukrainian drone strike, and persistent global trade uncertainty all inject headline risk. While these triggers traditionally drive yen demand as a safe haven, today’s price action suggests market participants are more focused on yield differentials and the evolving path for central bank policy in Tokyo and Washington.

technical landscape: key levels for usd/jpy

USD/JPY broke out of a descending channel overnight, staging an aggressive push past 144.35. Technical momentum is still strong, with the 20-period moving average at 143.80 offering the closest support. Further downside would target the 143.40–143.50 zone, and a more meaningful drop would probe 143.00 and the four-week low at 142.11. Bears are watching for a break below the 142.00 floor, which would open a run toward 141.55 and the psychologically significant 140.00 mark hit in late April. To the upside, resistance sits at 144.70–144.85 and then at the critical 145.00 barrier. RSI readings are overbought on sub-hourly timeframes, hinting at a potential short-term pullback, but for now, bulls control the narrative as long as the dollar remains buoyed by risk appetite and yield advantage.

macro triggers: what could spark the next usd/jpy swing

Looking ahead, all eyes turn to the US macro docket, with Durable Goods Orders, Conference Board Consumer Confidence, FOMC minutes, and the key PCE inflation print looming. Japan’s own Tokyo CPI data on Friday will be crucial for yen direction, and any signs that the BoJ may tighten faster could flip the script. Despite short-term volatility and headline-driven spikes, the fundamental backdrop slightly favors the yen, especially if global risk turns and BoJ signals any surprise hawkishness. For now, USD/JPY is holding its ground in the mid-144s, but the next catalyst—be it US data or Japanese inflation—could send the pair on its next decisive leg, with 145.00 and 142.00 marking the major battlegrounds for bulls and bears.

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