Japanese Yen Forecast: BoJ Decision and Fed Rate Cut to Drive USD/JPY

Takaichi trade sends USD/JPY up 1.5% to close the week at 152.868, its highest weekly close since late January 2025. Sanae Takaichi became Japan’s first woman prime minister. Her election win raised expectations for a stimulus package and a more dovish Bank of Japan monetary policy stance, weighing on the Japanese yen.

The weaker yen came despite a pickup in Japanese inflationary pressures, where the annual inflation rate rose from 2.7% in August to 2.9%. Slower services sector activity and a deeper contraction across the manufacturing sector overshadowed the inflation numbers.

This week, the Bank of Japan will take center stage, with economists widely expecting policymakers to keep interest rates at 0.5%. Forward guidance will be pivotal, given recent economic data and Takaichi’s election win. Although the BoJ interest rate decision, forward guidance, and GDP and inflation forecasts will influence USD/JPY trends, traders should closely monitor upcoming economic data releases.

Japanese Consumer Confidence in Focus

On Wednesday, October 29, consumer confidence figures will provide insights into household spending trends. Economists forecast the Consumer Confidence Index to rise from 35.3 in September to 35.6 in October.

A higher-than-expected reading could signal a pickup in consumer spending, fueling demand-driven inflation. Uptrends in household spending and inflation would support a more hawkish BoJ rate path, lifting demand for the yen. On the other hand, a lower print may suggest a softer inflation outlook, weighing on the yen.

Bank of Japan Interest Rate Decision, Governor Ueda, and Forecasts in the Spotlight

While consumer confidence is a key stat, the Bank of Japan’s interest rate decision on Thursday, October 30, will be the main event. GDP and inflation forecasts and Governor Kazuo Ueda’s press conference will also be key drivers for the week.

Barring a surprise rate hike, traders should consider the BoJ’s forecasts and Governor Kazuo Ueda’s press conference. Upward revisions to GDP and inflation could fuel speculation about a December or January hike, lifting the yen. Conversely, weaker forecasts could sink bets of monetary policy tightening and weigh on the yen.

However, Governor Ueda will have the final say. Views on Prime Minister Takaichi’s monetary policy stance and plans for fiscal stimulus would likely be crucial near-term USD/JPY trends.

Labor, Retail Sales, and Tokyo Inflation in Focus

On Friday, October 31, several key economic data releases will round off a potentially volatile week for USD/JPY.

Economists forecast retail sales to increase 0.7% year-on-year (YoY) in September after falling 1.1% in August. A sharper rise could signal a pickup in economic momentum, given that private consumption contributes about 55% to Japan’s GDP. Furthermore, a rebound in retail sales may drive inflation, supporting a more hawkish BoJ policy stance. On the other hand, a continued decline in retail sales could temper BoJ rate hike bets, dampening appetite for the yen.

Economists expect Tokyo’s annual inflation rate to rise from 2.5% in September to 2.7% in October, moving further from the BoJ’s 2% target. A higher print could raise expectations of a near-term BoJ rate hike, supporting a stronger yen. However, a lower reading may allow policymakers to delay rate hikes.

Economists forecast the unemployment rate to drop from 2.6% in August to 2.5% in September. A tighter labor market could boost wages and drive household spending, supporting a BoJ monetary policy adjustment. Conversely, another increase in unemployment may raise concerns about wages and spending, potentially delaying rate hikes.

Follow our real-time updates to stay ahead of USD/JPY market developments.

USD/JPY Outlook: Economic Indicators and the BoJ

• Bullish Yen Scenario: Strong Japanese data, upward revisions to BoJ forecasts, or a hawkish BoJ outlook could push USD/JPY below 150. If breached, 147.5 would be the next key support level.
• Bearish Yen Scenario: Weak data, downward revisions to BoJ forecasts, or a dovish BoJ outlook may send the pair toward 155.

Crucially, a move toward 155 could fuel speculation about a Ministry of Finance intervention, mirroring events in 2024. Tony Sycamore, market analyst at IG.com, commented:

“Meanwhile, FX intervention, which is the remit of the Ministry of Finance and independent of BoJ policy, remains possible if USD/JPY rallies above ~155. This would be a repeat of the 2022/2024 scenarios, when the MoF conducted yen‑buying intervention in response to dovish BoJ driven yen weakness.”

Inflation, GDP, the Labor Market, and the Fed in Focus

Traders face the risk of heightened USD/JPY volatility given that the BoJ’s interest rate decision clashes with a potential Fed rate cut. Meanwhile, economic data releases may depend on developments in Washington, as the US government shutdown reaches day 26.

• CB Consumer Confidence (October 28): Expected to fall from 94.2 in September to 93.9 in October.
• Fed interest rate decision and press conference: (October 29): Economists expect a 25-basis-point rate cut and support for further easing in December.
• Initial jobless claims (October 30): Dependent on Senate votes.
• Q3 GDP (October 30): Hinged on developments on Capitol Hill.
• US Personal Income & Outlays report (October 31): Dependent on the US government reopening.

Furthermore, delayed economic data, including the jobs report and weekly jobless claims, will need close monitoring if the Senate passes a stopgap funding bill.

Traders face several potential scenarios, underscoring the risk of a volatile week ahead:

Weaker-than-expected US labor market data, softer inflation, and a dovish Fed rate cut. These scenarios may hit US dollar demand, pushing USD/JPY toward 150. A drop below 150 would bring the 50-day EMA and the 149.358 support level into play.

Stronger US labor market data, rising inflation, and a hawkish Fed rate cut. These scenarios may lift demand for the US dollar, sending USD/JPY toward 155. A break above 155 could open the door to retesting the 156.884 resistance level.

Short-term Forecast:

• Bullish US Dollar Scenario: Strong US economic data, a 25-basis point Fed rate cut, and a hawkish Fed Chair may send USD/JPY toward 155.
• Bearish US Dollar Scenario: Weak US data, a 25-basis point cut, and support for further rate cuts could push USD/JPY below 150.

USD/JPY Price Action

Daily Chart

On the daily chart, USD/JPY trades above the 50- and 200-day Exponential Moving Averages (EMAs), affirming a bullish bias.

A break above the October 10, 2025, high of 153.274 could support a move toward the February 2025 high of 155.880. A sustained move through 155.880 may pave the way toward the 156.884 resistance level.

On the downside, a break below 152 could bring the 150 psychological support level into play. If breached, the 50-day EMA and 149.358 would be the next key support levels.

Key Takeaway

The USD/JPY pair’s recent trends highlighted the influences of politics, economic data, and speculation about the BoJ and Fed’s policy stances.

This week’s data, the BoJ and the Fed’s interest rate decisions, and the US Senate votes will drive sentiment. However, the Fed and BoJ’s forward guidance will likely be key for the near-term outlook.

Consult our economic calendar for historical and upcoming data.