Japanese Yen Forecast: Intervention Risks Rise as Dollar Firms

USD/JPY hovered near an eight-month high on Monday, November 3, amid renewed speculation that the Japanese government could intervene to support the yen.

Investors shrugged off hopes for a December Fed rate cut after Fed Chair Powell signaled a more cautious outlook, boosting demand for the US dollar. Meanwhile, uncertainty around the Bank of Japan’s next move kept the yen under pressure.

The surge followed Sanae Takaichi’s historic election victory, becoming Japan’s first woman prime minister. Prime Minister Takaichi’s support for ultra-loose monetary policy triggered a yen sell-off, sending USD/JPY from 147.460 on October 3 to the 154 level.

Speculation about Japanese government action has resurfaced after the Ministry of Finance warned about a yen stability. The USD/JPY pair dropped back to the 151 level following the threat before reclaiming the 154 handle.

Bank of Japan to Walk a Policy Tightrope

Speculation about an intervention came as the Bank of Japan signaled a softer inflation outlook in the first half of 2026. Cooling inflation could ease pressures on households and boost consumer spending.

However, a weaker Japanese yen could push import prices higher, countering any cooling effects of inflation on domestic demand.

The BoJ could potentially address yen weakness by signaling further rate hikes and raising interest rates in December. Previous interventions to bolster the yen have been short-lived, suggesting a BoJ policy adjustment would have a more lasting effect.

Hotter Tokyo inflation in October supported a more hawkish BoJ rate path. The annual inflation rate rose from 2.5% in September to 2.8%, while the so-called ‘core-core’ inflation rate jumped from 2.5% in September to 2.8% in October. The Tokyo inflation data pointed to short-term price pressures, contrasting with the BoJ’s softer medium-term outlook.

The USD/JPY pair reacted modestly to the data, with a softer Japanese inflation outlook and less dovish Fed policy stance leaving the pair range-bound.

However, rising import prices may pressure the BoJ to raise rates despite concerns over US tariffs potentially weighing on wages and household disposable incomes. It could pose a dual challenge for the BoJ if import prices soar and wage growth slows further as producers grapple with tariff-induced margin squeezes.

Wage Growth and Intervention Risks

Crucially, a weaker yen exposes USD/JPY to intervention threats and BoJ rhetoric. Given Prime Minister Takaichi’s stance on monetary policy, the BoJ may need stronger justification to hike rates in December.

Wage growth figures due out on Thursday, November 6, will likely face intense scrutiny. A rebound in average cash earnings could boost bets on a December BoJ rate hike, driving demand for the yen. On the other hand, softer wage growth could signal a more dovish BoJ rate path, driving USD/JPY higher.

While officials have not indicated a specific intervention threshold for USD/JPY, the 155-160 range could trigger Japanese government move. The BoJ may be hard-pressed to signal a rate hike if wage growth slows.

BoJ Governor Kazuo Ueda left a December rate hike on the table last week, despite uncertainty about the economy, stating:

“I’m not saying that we need to wait until the final outcome of next year’s wage talks becomes available. We want to gather a bit more data on the initial momentum of the talks.”

The BoJ Governor stated that policymakers need more data on whether companies will continue to increase wages despite margin pressures from tariffs. Given the dynamics, signals of higher wages, and a resilient economy, could greenlight a BoJ hike, supporting a more bearish outlook for USD/JPY.

ISM Manufacturing PMI, Fed Speakers, and Capitol Hill in Focus

While traders consider the BoJ’s monetary policy outlook and intervention threats, US manufacturing PMI data will influence USD/JPY later on Monday.

Economists forecast the ISM Manufacturing PMI to rise from 49.1 in September to 49.2 in October. A sharper increase in the headline PMI could ease stagflation risks, sending USD/JPY toward 155. However, traders should consider employment and price trends.

A sharper contraction in the Employment PMI and a higher Prices PMI reading may raise risks of stagflation, pushing USD/JPY toward 153. Rising prices could dampen bets on Fed rate cuts despite a weakening US labor market.

Beyond the data, FOMC members’ speeches also require consideration, given the shifting sentiment toward the Fed’s rate path. FOMC member Lisa Cook and San Francisco Fed President Mary Daly are due to speak. Growing support to delay further policy easing could sustain US dollar strength, bullish for USD/JPY.

However, a continued deterioration in the US labor market and expectations of further BoJ rate hikes signal a bearish longer-term outlook.

USD/JPY Scenarios: Monetary Policy Divergence

• Bearish USD/JPY Scenario: Hawkish BoJ comments, intervention threats, weak PMI data, and dovish Fed rhetoric could push USD/JPY toward 153.
• Bullish USD/JPY Scenario: Dovish BoJ rhetoric, strong PMI data, and hawkish Fed comments could send USD/JPY toward 155.

Read the full USD/JPY forecast, including chart setups and trade ideas.

Key Market Drivers to Watch Today:

• Bank of Japan commentary.
• Japanese government intervention warnings.
• ISM Manufacturing PMI data.
• Developments on Capitol Hill.
• Fed speakers.

For more in-depth analysis, review today’s USD/JPY trading setups in our latest reports and consult the economic calendar.