Japanese Yen Weekly Forecast: 150 in View as BoJ Signals Shift and Trade Tensions Ease

USD/JPY Extends Gains on BoJ Pivot and Trade News – What’s Next for the Yen?

Risk appetite is back—but is the Yen on the ropes? As USD/JPY gains momentum amid a BoJ pivot and trade optimism, key economic data now hold the reins.

Easing US-China trade tensions reduced demand for safe-haven assets, including the Yen, while a Bank of Japan pivot from hawkish to cautious added further pressure on the Yen. As risk appetite returned, the USD/JPY pair rose 0.92% to close the week ending May 2 at 144.953. Meanwhile, gold fell 2.38% to $3,240 amid the broader risk-on sentiment.

Looking ahead, trade developments remain a key driver for USD/JPY. However, investors should also consider the Bank of Japan commentary and Japan’s economic indicators that could influence near-term price trends.

Services PMI in Focus

Market focus shifts to Japan’s finalized Services PMI on Wednesday, May 7. According to the preliminary survey, the Jibun Bank Services PMI rose from 50 in March to 52.2 in April. Since services contribute around 70% to Japan’s GDP, the higher PMI reading eased fears of a tariff-triggered economic slowdown.

A downward revision may support expectations of a near-term Bank of Japan monetary policy hold amid economic uncertainty. Conversely, an upward revision may revive bets on a near-term BoJ policy move.

Wages and Household Spending to Spotlight the Bank of Japan

On Friday, May 9, wage growth and household spending data could significantly impact the BoJ policy stance. Economists forecast household spending to slide 1.6% month-on-month in March after soaring 3.5% in February.

A higher reading may support a more hawkish BoJ rate path as consumer spending may fuel demand-driven inflationary pressures. On the other hand, a sharper fall in spending could temper bets on a Q3 2025 BoJ rate hike.

Wage growth numbers could give insights into future consumer demand trends. Economists expect average cash earnings to rise 2.3% year-on-year in March, down from 2.7% in February. Additionally, economists predict lower overtime pay, suggesting a potential pullback in consumer demand.

While rising wages and disposable income may support a hawkish stance, weaker data could prompt the BoJ to delay rate adjustments.

Consumption Concerns

East Asia Econ recently underscored the importance of consumption in the BoJ’s May policy decision:

“Japan – shouldn’t the BOJ be worried about consumption? Today’s BOJ’s GDP downgrades were all about tariffs affecting corporates. The bank didn’t sound worried about consumption. But in today’s data releases, the manufacturing PMI ticked up, while consumer confidence fell sharply to a level that’s only been lower three times in the survey’s history.”

Waning consumer confidence may signal weaker spending, which could soften inflation and keep the BoJ in a holding pattern.

USD/JPY Outlook: Wage Growth and Consumption Crucial for Trends

USD/JPY may see another choppy week. Global trade headlines remain in focus, alongside central bank commentary on tariffs and inflation.

• Bullish Yen Scenario: Upbeat wage growth and spending data, a hawkish BoJ stance, or an escalation in the global trade war could send USD/JPY below 140.
• Yen Carry Trade Unwind Risks: A USD/JPY drop below the September 2024 low of 139.576 could accelerate the Yen Carry Trade Unwind.
• Bearish Yen Scenario: Weaker data, dovish BoJ rhetoric, or easing trade tensions may drive the pair toward 150.

US Data and the Fed to Impact US Dollar Demand

Trade developments will remain pivotal for USD/JPY trends in the near term. However, upcoming US economic data will also influence the Fed rate path and US dollar demand. Key data releases this week include:

• ISM Services PMI (May 5).
• FOMC Interest Rate and Press Conference (May 7).
• Initial Jobless Claims (May 8).

Economists forecast the ISM Services PMI to slip from 50.8 in March to 50.6 in April. A fall below the 50 neutral level could raise fears of a US recession and bets on multiple Fed rate cuts. Conversely, a higher reading may temper expectations for near-term easing and boost US dollar demand.

Given the services sector contributes around 80% to the US GDP, Monday’s PMI data could influence Fed Chair Powell’s view of the US economy. Markets expect the Fed to leave interest rates at 4.5% on Wednesday, May 7.

Barring a surprise Fed rate cut, the focus will be on Fed Chair Powell’s press conference. Any indication that inflation remains the top priority may signal delayed rate cuts despite economic headwinds.

Potential Price Scenarios:

• Bullish US Dollar Scenario: Positive economic data and a hawkish FOMC press conference could drive USD/JPY toward 150.
• Bearish US Dollar Scenario: Softer-than-expected US economic and a dovish Fed policy outlook data may drag USD/JPY toward 140.

Short-term Forecast:

This week’s USD/JPY trajectory will depend on trade sentiment, central bank forward guidance, and key macro data.

USD/JPY Price Action

Daily Chart

On the daily chart, the USD/JPY trades below the 50-day and 200-day EMAs, preserving a bearish bias.

A move above last week’s high of 145.923 could open the door to testing the 50-day EMA. A sustained breakout may enable the bulls to target the 149.358 resistance level.

On the downside, a drop below last week’s low of 141.955 could expose 140 and the September 2024 low of 139.576.

The 14-day Relative Strength Index (RSI) stands at 50.75, suggesting room for further gains, with overbought territory beginning above RSI 70.

Final Thoughts

With key economic data and central bank events ahead, USD/JPY is likely to remain volatile. Traders should closely track trade headlines, central bank signals, and macroeconomic indicators for guidance.

For a deeper dive, explore our technical analysis here.