The Japanese yen gave back part of Thursday’s gains on Friday, slipping from its one-week high against the US dollar as soft consumption data and lingering uncertainty over Bank of Japan (BoJ) policy weighed on the currency. At the same time, recent hawkish hints from the BoJ and the possibility of official intervention have kept losses in check, while concerns around a prolonged US government shutdown and shifting Federal Reserve rate-cut expectations are capping the dollar’s upside, limiting USD/JPY’s downside.
Economic and Policy Drivers
- Japan’s household spending in September rose just 1.8% year-on-year—below the 2.5% forecast and down from 2.3% in August—and actually fell 0.7% on a seasonally adjusted monthly basis. This cooling in private consumption reinforces expectations that the BoJ will remain reluctant to tighten policy.
- Prime Minister Sanae Takaichi is reportedly planning a roughly $65 billion stimulus package to support growth and tame inflation. With the government pushing fresh fiscal support, the BoJ faces reduced pressure to raise rates.
- Minutes from the BoJ’s September 18–19 meeting showed policymakers debating a cautious path to rate hikes, even though several members suggested Japan’s 2% inflation target had been essentially met and a return to tightening might soon be possible.
- Vice Finance Minister and top FX official Atsushi Mimura warned that recent yen moves “deviate from fundamentals” and noted that long positions in the currency have been unwinding amid speculation over Japan’s macro policies.
- On the US side, the dollar is consolidating after recent losses as the record-long government shutdown drags on. With no Senate vote imminent on a House-passed funding bill—and Democrats vowing to block it—the lack of resolution is keeping dollar bulls on the sidelines.
- Fed rate-cut odds have also shifted after surprisingly hawkish commentary from key FOMC officials: futures markets now assign roughly a 69% chance of a December cut, tempering expectations for near-term dollar weakness.
- Investors are looking ahead to the preliminary University of Michigan Consumer Sentiment Index, since the shutdown has effectively blacked out official data like Nonfarm Payrolls and the unemployment rate.
Technical Outlook for USD/JPY
USD/JPY has struggled to sustain moves above the mid-154.00s and on Thursday broke below the former support zone of 153.30–153.25. That breakdown reinforces the case for further yen strength, though technical indicators suggest any decline will likely find a floor around 152.15–152.10. A clear move below 152.00 could trigger fresh selling, setting the stage for an extension of the pullback from this week’s February-high peak.
On the upside, a recovery above 153.25–153.30 would first encounter resistance near 153.65. Clearing that level would open the door back toward 154.00 and then the key pivot at 154.45. A sustained break above 154.45 could propel USD/JPY toward the 155.00 psychological mark and even challenge the 155.60–155.65 zone, with a stretch toward 156.00 possible if bullish momentum persists.
