Key Points
- USD/JPY hovers near 152.95, on track for a weekly loss of nearly 4% — its steepest since September 2024.
- Traders now see less than a 50% chance of a Bank of Japan rate hike in December, shifting expectations to March 2026.
The Japanese yen extended losses on Friday, trading around ¥152.95 per dollar, its weakest level since February, as investors reacted to political developments that signalled continuity in Japan’s ultra-loose monetary stance.
The currency has depreciated nearly 4% this week, its largest drop in more than a year, amid rising bets that the Bank of Japan (BOJ) will delay tightening further.
Leadership Change Reinforces Fiscal Dovishness
Markets were rattled after Sanae Takaichi, known for her preference for aggressive fiscal spending, won Japan’s leadership race, paving her way to become the next prime minister.
Her victory stoked expectations of expanded government stimulus and continued BOJ accommodation.
Takaichi said on Thursday that the central bank would operate “independently while aligning with the government’s economic goals,” a statement seen by traders as a signal of policy continuity rather than reform. Her pledge to “avoid excessive yen depreciation” did little to arrest the slide, as investors interpreted the comments as symbolic rather than interventionist.
Policy Outlook and Market Positioning
Markets now assign less than a 50% probability of a BOJ rate hike in December, with most expectations shifting toward March 2026.
While stronger-than-expected producer price data for September added pressure on policymakers, the market consensus remains that the BOJ will prioritise financial stability and wage growth before tightening further.
The widening U.S.-Japan yield differential continues to weigh on the yen, as U.S. Treasury yields remain elevated amid the Federal Reserve’s cautious approach to rate cuts.
Technical Analysis
The USD/JPY pair is trading around 152.95, slightly lower by 0.09%, but still hovering near its highest level of the year as the yen weakens under persistent U.S. dollar strength.
The pair’s recent surge reflects the widening policy divergence between the Federal Reserve and the Bank of Japan (BOJ), with the Fed maintaining a cautious stance on rate cuts, while the BOJ continues to uphold ultra-loose monetary conditions despite rising domestic inflationary pressures.
From a technical standpoint, USD/JPY remains firmly in bullish territory. The price is trading well above the 5-, 10-, and 30-day moving averages, showing strong short-term momentum.
The pair has broken through multiple resistance levels, including the previous ceiling near 148.50, now acting as support. The MACD indicator supports this bullish view, with widening divergence between the MACD and signal lines alongside a growing histogram, signalling sustained buying momentum.
However, traders should note that USD/JPY is now entering a historically sensitive zone near 153.00, where authorities in Tokyo have previously intervened to curb excessive yen weakness.
This psychological resistance level could trigger verbal warnings or even market action from Japanese officials if volatility rises. A pullback from this level would likely see the pair retest 147.80–148.50 as key support zones, where buying interest could re-emerge.
Cautious Forecast
While fundamentals support a stronger dollar in the near term, policymakers in Tokyo may grow increasingly uneasy with further yen depreciation. Verbal intervention or coordinated policy signals could emerge if the pair breaches ¥153 convincingly.
For now, traders are watching closely for any hints of BOJ discomfort or early signs of currency defence as the yen faces renewed downward pressure amid global uncertainty and Japan’s shifting political landscape.
