Japanese Yen Forecast: USD/JPY Eyes 160 on Fed Speakers, PMI Data

USD/JPY’s surge toward the 158 level has set the stage for heightened volatility as traders face a cluster of Japanese and US economic releases that could redefine monetary policy expectations.

The Japanese economy and USD/JPY faced heightened scrutiny after the Q3 GDP report showed a slump in external demand. USD/JPY climbed to a ten-month high of 157.893 this week. The USD/JPY pair reacted to the Q3 GDP report and rising concerns about Prime Minister Sanae Takaichi’s fiscal stimulus goals.

The third quarter data tempered Bank of Japan rate hike bets, placing greater emphasis on incoming Japanese economic data.

On Friday, November 21, crucial trade, national inflation, and Services PMI data will influence the BoJ rate path.

National Inflation Heats Up Amid Cooling Economic Momentum

Japan’s annual inflation rate ticked up from 2.9% in September to 3.0% in October, with the so-called core-core inflation rate rising from 3.0% to 3.1% in October.

An upswing in inflation would typically support a more hawkish BoJ policy stance. However, the third-quarter economic contraction and the BoJ’s projection of softer inflation through H1 2026 could limit the influence of the inflation data on the BoJ’s December interest rate decision.

Notably, USD/JPY showed a muted response to the data, briefly dropping from 157.415 to 157.195 before reclaiming 157.300.

Japanese Exports Slow in October

Japanese exports signaled a further loss of economic momentum early in the fourth quarter, given Japan’s trade-to-GDP ratio above 45%.

Exports increased by 3.6% year-on-year (YoY) in October, down from a 4.2% rise in September. October’s figures underscored the growing strain on Japan’s export engine, setting a weaker tone for fourth-quarter economic activity. Meanwhile, imports rose 0.7% YoY, down from 3.3% in September.

According to the Ministry of Finance:

• Exports to the US fell 3.1% YoY in October, easing from a 13.3% drop in September. Notably, exports continued to fall despite the US lowering tariffs on Japanese shipments from 25% to 15% on September 16.
• Exports to China rose 2.1% YoY in October, down from 5.8% in September.

While the drop in exports could reduce the likelihood of a December BoJ rate hike, October’s import decline also reflects the yen’s pressure on household budgets.

USD/JPY climbed 4.2% in October, raising import prices and Japanese consumer prices. The weaker yen likely contributed to weaker imports, potentially dampening demand-driven inflation. Notably, imports from the US were down 33.6% YoY, following September’s 37.8% YoY decline.

The USD/JPY moved from 157.297 to 157.358 after the release of the trade data, as traders reinforced expectations of a cautious BoJ.

BoJ and Prime Minister Takaichi’s Policies Add to Yen Weakness

Softer Japanese data and a weaker yen have intensified focus on Prime Minister Sanae Takaichi’s ultra-loose monetary policy stance and BoJ Governor Kazuo Ueda’s forward policy guidance.

October’s data came after the first meeting between Japanese Prime Minister Sanae Takaichi and BoJ Governor Kazuo Ueda on Tuesday, November 18. BoJ Governor Ueda kept a potential rate hike on the table, stating that monetary policy decisions will hinge on incoming data.

Wage growth trends will likely be crucial for the BoJ, given the weaker yen-import price dynamic. Updates from Japanese labor unions pushing for wage hikes ahead of the 2026 spring negotiations could support a more hawkish BoJ rate path.

Later in the morning session, Japan’s S&P Global Services PMI also requires consideration. Economists expect the Services PMI to drop from 53.1 in October to 52.8 in November. Slowing services activity would support a less hawkish BoJ rate path, given that the sector contributes around 70% to Japan’s GDP.

US Services PMI and Fed Speakers in Focus

While Japanese trade data faced market scrutiny, US services sector data will influence bets on a December Fed rate cut.

Economists expect the S&P Global Services PMI to fall from 54.8 in October to 54.6 in November. A modest drop in the headline PMI would signal economic resilience, given that the services sector accounts for around 80% of US GDP.

However, traders should consider service sector price trends, given the Fed’s increased concerns about inflation. As a key contributor to inflation, price trends will likely be the key driver for the US dollar. Elevated prices would support a more hawkish Fed policy stance, sending USD/JPY toward 160.

Beyond the data, FOMC members’ speeches may also move the dial. Growing support to delay further monetary policy easing to tame inflation would send USD/JPY higher. FOMC members John Williams, Michael Barr, Philip Jefferson, and Lorie Logan are on the calendar to speak. Views on inflation, the labor market, and the timeline for rate cuts will be crucial for the USD/JPY pair.

USD/JPY Scenarios: Diverging Monetary Policies

• Bearish USD/JPY Scenario: Hawkish BoJ rhetoric, intervention warnings, softer US Services PMI, and dovish Fed chatter could drag USD/JPY toward 155.
• Bullish USD/JPY Scenario: Dovish BoJ signals, stronger US PMI data, and hawkish Fed rhetoric could send USD/JPY toward 160.

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

Key Market Drivers to Watch Today:

• Bank of Japan commentary.
• Japanese Services PMI.
• Intervention threats.
• US Services PMI.
• Fed speakers.

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