Japanese Yen Weekly Forecast: USD/JPY Falls as Fed–BoJ Split Widens

USD/JPY snaps a five-week run of new higher highs, as rising bets on a narrowing US-Japan rate differential favored the yen. US jobs data bolstered bets on a December Fed rate cut. Meanwhile, Japanese inflation and retail sales figures lifted expectations of a December BoJ rate hike.

Crucially, the Fed-BoJ collision course raises the risk of a yen carry trade unwind, which would send USD/JPY sharply lower.

Flashback: The Q3 2024 Parallel

In July 2024, the BoJ cut purchases of Japanese Government Bonds (JGBs) and raised short-term interest rates to 0.5%. The decision coincided with rising bets on a Fed rate cut, triggering a yen carry trade unwind. The policy decision sent USD/JPY crashing from 155.216 to 139.576 before recovering.

Fast forward to December 2025, and the BoJ and the Fed’s policy stances suggest a similar dynamic to Q3 2024, signaling a bearish short- to medium-term outlook.

Below, we examine the upcoming economic calendar, the medium-term catalysts (4-8 weeks), and the technical levels traders should watch.

Key Japanese Economic Indicators to Watch

In the week ahead, key economic indicators and Bank of Japan monetary policy cues will influence bets on a December rate hike. Key data includes capital spending, consumer confidence, and household spending.

Capital Spending: A Signal for Wage and Labor Trends

The BoJ’s increasing attention to wage growth will place a greater focus on capital spending trends on Monday, December 1. Economists forecast capital spending to rise 5.9% year-on-year in Q3, down from 7.6% in the previous quarter.

Weaker capital spending would indicate softer business investment, potentially leading to job cuts and lower wages. A cooling labor market and softer wage growth typically affect household purchasing power and spending. A lower spending outlook dampens demand-driven inflationary pressures, supporting a less hawkish BoJ policy stance.

A drop in capital spending would temporarily temper demand for the yen. However, updates from wage negotiations for 2026 and last week’s Q4 economic indicators are likely to keep the hope of a rate hike alive. Given these dynamics, the short- to medium-term outlook for USD/JPY is bearish.

Consumer Confidence: Impact of Lower Tariffs

Given October’s upswing in retail sales, consumer confidence figures on Tuesday, December 2, will require consideration. Consumer confidence data will provide insights into whether the economy has gained further momentum after contracting in Q3.

Economists expect consumer confidence to rise from 35.8 in October to 35.9 in November. Improving sentiment would support a positive outlook on private consumption, which accounts for roughly 55% of Japan’s GDP. Crucially, increased domestic demand pushes consumer prices higher, supporting tighter monetary policy.

Notably, consumer confidence slumped from 34.1 in March to 31.2 in April, as President Trump’s tariff policies hit sentiment. However, confidence has improved sharply in H2 2025. Crucially, Trump cut tariffs on Japanese goods from 25% to 15% in September, which should lift sentiment.

A pickup in consumer confidence will likely boost demand for the yen, aligning with a bearish USD/JPY outlook.

Household Spending: A Key Confirmation Indicator

On Friday, December 5, household spending figures will indicate whether lower tariffs and the upward trend in consumer confidence have translated into higher consumption.

Economists forecast household spending to rise 0.7% month-on-month in October, reversing a 0.7% drop in September. A rebound in spending would signal a pickup in economic momentum and potentially higher inflation. These dynamics would support a December BoJ rate hike, boosting demand for the Japanese yen.

Economists Maintain a Hawkish BoJ Outlook

For context, private consumption increased 0.1% quarter-on-quarter in Q3, after expanding 0.4% in Q2. Weaker consumption contributed to the 0.4% quarterly economic contraction.

However, economists brushed aside the Q3 data, maintaining expectations of a near-term BoJ policy adjustment. According to November’s Reuters poll, conducted between November 11 and 18:

• 43 of 81 economists (53%) expected the BoJ to raise interest rates to 0.75% at the December policy meeting. In October, 31% of economists predicted a December rate hike.
• 100% of economists forecast a 0.75% borrowing rate by the end of March, up from 96% of respondents in the October poll.
• Meanwhile, the median prediction for the policy rate at the end of 2026 remained unchanged at 1.00%.

Stronger consumer confidence and a recovery in household spending will reinforce confidence in a December hike.

BoJ Communications on Watch

With key economic reports set to influence sentiment toward the Fed rate path, traders should also monitor BoJ speeches.

On Monday, December 1, BoJ Governor Kazuo Ueda is on the calendar to speak. His views on wages and the effect of US tariffs on the Japanese economy are likely to set the tone for the week. Support for a December rate hike on sticky inflation and an upswing in retail sales would send USD/JPY lower.

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

US Economic Calendar: Fed Rate-Cut Bets in Focus

As Japan’s policy outlook turns hawkish, US economic reports could fuel speculation about a December Fed rate cut.

Key data releases for the week ahead include:

• ISM Manufacturing PMI (December 1): Forecast to slip from 48.7 in October to 48.6 in November.
• ADP Employment Change (December 3): Expected to rise by 20k in November, down from 42k in October.
• ISM Services PMI (December 3): Forecast to fall from 52.4 in October to 52.1 in November.
• Initial Jobless Claims (December 4): Expected to increase from 216k week ending November 22 to 218k week ending November 29.
• Core PCE Price Index (November 26): Forecast to increase 2.9% YoY in September, matching August’s rise.

Slower private sector activity, a weaker labor market, and softer-than-expected US inflation will raise bets on a December Fed rate cut, bearish for USD/JPY.

Fed Chair Powell speaks on Tuesday, December 2; support for a December cut will likely accelerate the USD/JPY pair’s reversal from Q4’s 5.63% rally. USD/JPY briefly dropped from 157.541 to the mid-155 region last week on rising Fed-cut speculation. A move toward 150 in the coming week is plausible.

Market View: Medium-Term Yen Strength

In my opinion, USD/JPY will likely drop below 150 on rising prospects of a BoJ rate hike and a Fed rate cut. A dovish Fed and hawkish BoJ would reinforce the bearish medium-term outlook, making downside protection essential for long-USD/JPY positions. A 150 stop loss is appropriate for traders carrying longs through H2 2025.

Counter-Trend Risks: What Could Push USD/JPY Toward 160?

Upside risks include:

• Stronger US inflation.
• Firm US services sector activity.
• Resilient US jobs data.
• Hawkish Fed chatter.
• Weaker Japanese fundamentals.
• Dovish BoJ rhetoric.

However, yen intervention threats should cap upside near the 157.893 November 20 high.

Technical Outlook: Bearish Momentum Building

On the daily chart, USD/JPY continued trading well above the 50- and 200-day Exponential Moving Averages (EMAs), reaffirming bullish momentum. However, fundamentals are beginning to diverge sharply from the technical trend.

A drop below 155 could expose the 50-day EMA and the 153 support level. If breached, 150 and the 200-day EMA would be the next support levels. Crucially, a drop below the 50-day EMA would support the bearish short- to medium-term outlook.

October’s golden cross sent USD/JPY from 150.188 to the November 20 high of 157.893. A death cross would push USD/JPY below 150, exposing the pair to the June low of 142.367.

Key Takeaways

The USD/JPY pair has soared 8.44% in H2 2025, reversing an 8.48% slump in H1 2025. Key economic reports and a narrowing rate differential would support a bearish short- to medium-term trajectory. Key levels will include 150 and 140 on the downside and 157 on the upside.

Consult our economic calendar for historical and upcoming data.