Japanese Yen Weekly Forecast: Will USD/JPY Break 151? Fed and BoJ Events Set the Stage

USD/JPY Hits 8-Week High Amid Shifting BoJ and Fed Policy Outlooks

USD/JPY soared to an eight-week high as expectations of a Bank of Japan rate hike faded alongside reduced bets on multiple Fed rate cuts. Shifting monetary policy outlooks widened the US-Japan interest rate differential, lifting the US dollar.

USD/JPY rallied 1.07% to close at 149.472 in the week ending September 26. A mixed start to the week saw the pair drop to a low of 147.461 before surging to a high of 149.957.

Stronger-than-expected US GDP and labor market data and easing Tokyo inflation extended the pair’s winning streak to five weeks.

Outlook: Key Economic Data and the Bank of Japan in Focus

This week, Japan’s retail sales, Tankan surveys, consumer confidence, and labor market data could drive yen trends. However, the Bank of Japan’s Summary of Opinions and Governor Kazuo Ueda’s speech could be pivotal after last week’s inflation data.

Will Retail Sales Signal a Pickup in Consumer Prices?

On Tuesday, September 30, Japanese retail sales could fuel speculation about an October BoJ rate hike. Economists forecast retail sales to rise 1% month-on-month in August after sliding 1.6% in July.

A sharper increase could support demand-driven inflation and a more hawkish BoJ policy stance, lifting demand for the yen. However, an unexpected fall in retail sales may signal cooling inflation, weakening the case for a rate hike.

Bank of Japan Summary of Opinions Crucial After Two Dissents

The BoJ’s Summary of Opinions, also due on Tuesday, will draw scrutiny after two board members dissented from keeping rates at 0.5% in September.

Evidence of broader support for tightening could boost bets on an October move, while a consensus to delay would weigh.

Tankan Surveys to Spotlight Business Confidence

On Wednesday, October 1, the BoJ’s Tankan Surveys for the third quarter will take center stage. Economists forecast the Tankan Large Manufacturers Index to increase from 13 in Q2 to 15 in Q3.

A higher reading could ease concerns about US tariffs impacting demand, supporting a more hawkish BoJ policy stance. On the other hand, a lower print may temper rate hike expectations.

The BoJ has discussed the need to assess the effect of US tariffs on the Japanese economy before considering a monetary policy adjustment.

Consumer Confidence and Household Spending Plans

On Thursday, October 2, economists expect Japan’s Consumer Confidence Index to rise to 35.2 in September, up from 34.9 in August. Improved sentiment could signal stronger spending and inflationary pressures. Conversely, a lower print may curb spending, supporting a less hawkish BoJ rate path.

Labor Market Data and Ueda’s Guidance

On Friday, October 3, unemployment data may also influence the BoJ’s policy stance and demand for the yen. Economists forecast unemployment to rise from 2.3% in July to 2.4% in August. Rising unemployment would indicate weaker wages, potentially cooling consumer spending and demand-driven inflation. On the other hand, steady unemployment may support a rate hike later in the month.

Beyond the data, Bank of Japan Governor Kazuo Ueda will wrap up a busy week. Forward guidance on the timing of an interest rate hike could be pivotal for 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: Strong Japanese data or hawkish BoJ commentary could push USD/JPY toward 145.
• Bearish Yen Scenario: Softer data or dovish signals may send the pair toward the August high of 150.917.

US Data and Fed Signals to Drive the Dollar

The US economic calendar is equally heavy, with consumer confidence, labor market data, and the ISM Services PMI in focus.

Key releases include:

• CB Consumer Confidence Index (September 30): Expected to drop from 97.4 in August to 96 in September.
• JOLTs Job Openings (September 30): Forecast to fall from 7.181 million in July to 7.1 million in August.
• ADP Employment Change (October 1): Expected to report a 30k rise in September after August’s 54k increase.
• Initial Jobless Claims (October 2): Forecast to rise from 218k (week ending September 20) to 220k (week ending September 27).
• Nonfarm Payrolls (October 3): Expected to increase by 39k in September after a 22k rise in August.
• Unemployment Rate (October 3): Forecast to remain at 4.3% in September.
• Average Hourly Earnings (October 3): Expected to rise 3.7% year-on-year in September, mirroring August’s increase.
• ISM Services PMI (October 3): Forecast to remain at 52 in September.

Stronger-than-expected US labor market data could dampen Fed rate-cut expectations, boosting the dollar and USD/JPY. Softer readings would cement bets on an October Fed rate cut, weighing on the US dollar.

Beyond the data, Fed speeches will require consideration as the October interest rate decision looms. Multiple FOMC members are on the calendar to speak. Reaction to last week’s inflation data and this week’s labor market indicators could fuel USD/JPY volatility.

Short-term Forecast:

• Bullish US Dollar Scenario: Strong US economic data or hawkish Fed cues may drive USD/JPY toward the August 1 high of 150.917.
• Bearish US Dollar Scenario: Softer US data or dovish Fed rhetoric could drag USD/JPY toward 145.

USD/JPY Price Action

Daily Chart

On the daily chart, the USD/JPY trades above the 50-day and the 200-day Exponential Moving Averages (EMAs), signaling bullish momentum.

A breakout above the September 26 high of 149.957 could bring the August high of 150.917 into sight. A sustained move through 150.917 may enable the bulls to target the March high of 151.301.

On the downside, a drop below the 149.358 support level may pave the way toward the 200-day EMA. If breached, the pair could test the 50-day EMA, with 145 as the next key support level.

Key Takeaway

The USD/JPY pair’s five-week winning streak reflects shifting sentiment toward BoJ and Fed rate paths. This week’s data and central bank policy signals could change the narrative, potentially fueling price volatility. Closely monitoring real-time developments will be crucial, with both the Fed and BoJ facing crucial policy decisions in October.

Consult our economic calendar for historical and upcoming data.