During Wednesday’s Asian session, USD/JPY failed to build on its previous break above 156.00 and edged down to around 155.75, though the move lacks strong bearish conviction. The Japanese yen is outperforming, driven by rising expectations of a Bank of Japan rate hike. BoJ Governor Kazuo Ueda’s recent comments—suggesting the bank is increasingly likely to meet its economic and inflation forecasts—were interpreted as a clear signal that tightening is on the horizon, supporting the yen and pressuring USD/JPY.
Meanwhile, the US dollar remains near its weakest levels since November 14 as markets grow more confident the Fed will cut rates next week. This policy divergence—Fed easing versus BoJ tightening—continues to favor the yen and points to further downside risk for the pair.
However, a generally positive risk appetite is preventing traders from aggressively shorting USD/JPY, as many prefer to wait for major US releases before taking fresh positions. Today’s US data slate includes the ADP private-sector employment report and the ISM Services PMI, while all eyes remain on Friday’s Personal Consumption Expenditures Price Index for clues on the Fed’s next move.
