Japanese Yen Weekly Forecast: Will USD/JPY Break 150 on Fed and BoJ Signals?

USD/JPY Extends Winning Streak as Political Uncertainty Impacts the Yen

USD/JPY traders face a crucial few weeks ahead as politics and the Bank of Japan collide.

The USD/JPY pair gained 0.20% to close at 147.646 in the week ending September 12. The pair swung from a high of 148.577 to a low of 146.306. However, speculation that Japan’s Prime Minister Shigeru Ishiba’s resignation may delay a Bank of Japan rate hike triggered a USD/JPY recovery.

Outlook: Trade, Inflation, and the BoJ in the Spotlight

This week’s economic calendar—trade data, inflation figures, and BoJ guidance—will be key drivers for the yen.

Japan’s economy expanded more than expected in the second quarter, growing 0.5% quarter-on-quarter (prelim: 0.3%). An upward revision to private consumption, from 0.2% to 0.4%, boosted the economy. External demand rebounded in the quarter, despite US tariffs, contributing to the economy.

The pickup in economic activity coincided with inflation continuing to hold above the BoJ’s 2% target, supporting bets on a Q4 BoJ rate hike.

Will Japan’s Trade Terms Boost the Economy?

On Wednesday, September 17, Japanese trade data could dampen sentiment toward the economy and BoJ monetary policy.

Economists forecast exports to fall 1.9% year-on-year in August after declining 2.6% in July, while expecting imports to slide 4.2% (July: -7.4%).

Why does trade data matter for markets?

A sharper drop in exports could signal weakening momentum, given that Japan has a trade-to-GDP ratio of around 45%. The Bank of Japan could delay raising interest rates if the economy loses steam.

BoJ Governor Kazuo Ueda recently stated that rate hikes would resume if the economy and prices move in line with the Bank’s projections. Fading bets on a Q4 BoJ rate hike would weigh on demand for the yen.

On the other hand, a surprise rise in exports could support a more hawkish BoJ rate stance, lifting appetite for the yen.

Machinery Tool Orders Spotlight Business Sentiment

On Thursday, September 18, Japanese machinery tool orders will require consideration. Economists expect orders to fall 1.7% month-on-month in July after rising 3% in June.

A larger-than-expected drop could signal weaker demand, affecting the labor market and wage growth. Softer wage growth may curb spending and cool inflation, supporting a less hawkish BoJ rate path.

Conversely, rising orders would signal a pickup in demand, supporting a Q4 BoJ rate hike.

While the data will influence USD/JPY trends, August’s US-Japan trade deal may limit the effect of falling orders on the pair. The US lowered tariffs on Japanese goods to 15%, potentially boosting demand.

Will Inflation Make or Break the Chances of a Q4 BoJ Rate Hike

On Friday, September 19, crucial national inflation figures may intensify speculation on the timing of the BoJ’s next policy move.

Economists forecast the annual inflation rate to ease from 3.1% in July to 2.8% in August. Meanwhile, economists expect the so-called “core-core” inflation rate to soften to 3.2% (July: 3.4%), well above the 2% inflation target.

A sharper drop in core-core inflation may close the door on a Q4 BoJ rate hike, weighing on the yen. Conversely, a higher print could signal a 25-basis point hike as early as October.

Bank of Japan Interest Rate Decision to Drive USD/JPY Volatility

This week’s economic data will fuel speculation about the timeline for a rate hike. However, the BoJ interest rate decision and the Outlook Report will be the main events.

Economists expect the BoJ to maintain interest rates at 0.5% on Friday, September 19. According to the latest Bloomberg survey, all economists expect the BoJ to stand pat on Friday. Meanwhile, 36% predict an October hike, and overall 88% expect tightening by January 2026.

Unless there is a surprise policy move, Governor Ueda’s comments and the Outlook Report will give insights into the Bank’s view on the economy, prices, and political uncertainty.

A positive outlook on the economy and prices and a lack of concern about the October 4 election for a new PM may signal a Q4 rate hike. While most expect a hike in Q4 2025, political and economic uncertainty mean some economists see risks of a delay into 2026. A less hawkish BoJ stance would likely pressure the yen.

Bookmark our real-time updates to stay ahead of USD/JPY volatility.

USD/JPY Outlook: Economic Indicators and the BoJ

• Bullish Yen Scenario: Stronger Japanese data or hawkish BoJ rhetoric could drag USD/JPY toward 145.
• Bearish Yen Scenario: Weaker Japanese data or dovish BoJ signals may drive the pair toward 150.

Retail Sales, Jobless Claims, and the Highly Anticipated Fed Rate Decision in Focus

In the US, it’s a pivotal week for the US dollar as markets consider sticky inflation and a cooling labor market. Retail sales and jobless claims will influence sentiment toward the US economy and the Fed rate path. However, the FOMC interest rate decision, economic projections, and press conference will be the key price drivers.

Key events include:

• Retail sales (September 16): Expected to rise 0.3% month-on-month in August after increasing 0.5% in July.
• FOMC interest rate decision, economic projections, and press conference (September 17).
• Initial Jobless Claims (September 18): Forecast to drop from 263k (week ending September 6) to 240k (week ending September 13).

A sharper increase in retail sales and lower jobless claims print could temper expectations of multiple Fed rate cuts through the remainder of 2025. A less dovish Fed rate path could raise demand for the US dollar. Conversely, falling retail sales and a higher jobless claims print may support a more dovish Fed policy stance.

Meanwhile, economists expect the Fed to cut rates by 25 basis points on Wednesday. A 25-basis-point policy adjustment would put greater emphasis on the economic projections and press conference.

The US dollar could face heavy selling pressure if the projections and Fed Chair Powell point to two additional rate cuts in the fourth quarter. On the other hand, a single rate cut or policy hold through Q4 may boost appetite for the greenback.

Short-term Forecast:

USD/JPY’s near-term outlook will hinge on key economic data, central bank monetary policy decisions, and press conferences.

• Bullish US Dollar Scenario: Strong US data or a less dovish Fed policy outlook may drive USD/JPY toward 150.
• Bearish US Dollar Scenario: Softer US data or dovish Fed signals could push USD/JPY toward 145.

USD/JPY Price Action

Daily Chart

On the daily chart, the USD/JPY remains above the 50-day Exponential Moving Average (EMA) but below the 200-day EMA. The EMAs indicate a bearish near-term but bullish longer-term bias.

A breakout above the 200-day EMA may open the door to testing the 149.358 resistance level. A sustained move through the 149.358 resistance level could enable the bulls to target the August 1 high of 150.917.

On the downside, a drop below the 50-day EMA could bring the August 14 low of 146.214 into play. If breached, 145 would be the next key support level.

Key Takeaway

Ongoing USD/JPY volatility reflects shifting data and sentiment toward monetary policy. Tracking real-time developments will be key, with both the Fed and BoJ in focus.

Consult our economic calendar for historical and upcoming data.