Japanese Yen Weekly Forecast: Yen Awaits Inflation Data as Jackson Hole Takes Center Stage

USD/JPY Snaps Losing Streak in Another Choppy Week

The USD/JPY enters a pivotal week as traders brace for key economic indicators from both sides of the Pacific. Private sector PMIs, inflation, and central bank cues from Tokyo to Washington could set the stage for the Yen’s next move, amid shifting sentiment toward rate paths.

USD/JPY fell 0.4% to end the week at 147.119. In a data-heavy week, the pair rallied to an August 12 high of 148.517 before briefly dropping to an August 14 low of 146.214.

Outlook: Terms of Trade, Services PMI, and Inflation Numbers to Fuel BoJ Rate Hike Expectations

Why this week matters more than others: terms of trade, services sector data, and national inflation figures will influence the Bank of Japan’s policy stance and USD/JPY trends.

With the BoJ assessing the potential impact of US tariffs on the economy, terms of trade will have a significant influence.

Tertiary Industry Index Kickstarts the Week

On Monday, August 18, investor focus will turn to Japan’s tertiary industry. Economists forecast the Tertiary Industry Index to rise 0.3% month-on-month in June, following a 0.6% increase in May.

A higher-than-expected reading could signal a pickup in economic momentum, raising expectations of a Q4 BoJ rate hike. A more hawkish BoJ policy stance would boost demand for the Yen. On the other hand, an unexpected fall may temper bets on a BoJ rate hike, weighing on the Yen.

Why does the Tertiary Industry Index matter? The Tertiary Industry Index relates to the services sector. Given that the services sector accounts for over 70% of Japan’s GDP, Index trends provide the BoJ with crucial insights into Japan’s economy.

Terms of Trade: Will US Tariffs Impact External Demand?

On Wednesday, August 20, trade data will take center stage after the second quarter’s pickup in external demand. Economists expect exports to fall 2.1% year-on-year in July after declining 0.5% in June, while forecasting imports to tumble 10.1% (June: +0.2%).

Weaker-than-expected exports could reflect the effect of US tariffs on demand for Japanese goods. Falling external demand could impact the economy and delay BoJ rate hikes, affecting Yen appetite.

On the other hand, an unexpected upswing in exports may ease concerns about tariffs affecting Japan’s economy. Under this scenario, the BoJ may indicate a more hawkish policy stance.

In Q2, Japan’s economy expanded 0.3% quarter-on-quarter after growing 0.1% in the previous quarter. Notably, external demand rose 0.3% after falling 0.8% in the first quarter, contributing to a higher GDP reading.

Japan Services PMI: A Key Sector for the BoJ and Monetary Policy

On Thursday, August 21, Japan’s S&P Global Services PMI will influence the BoJ rate path. Economists expect the PMI to drop from 53.6 in July to 52.8 in August. Given the sector’s significance, a weaker PMI print could temper bets on further monetary policy tightening. However, a higher reading may fuel speculation about a Q4 rate hike and drive Yen demand.

Beyond the headline PMI, traders should also consider price trends. Wage growth and selling prices could give the BoJ clues on potential consumer price trends.

National Inflation in the Spotlight

Inflation numbers round off a crucial week. Economists expect the headline and the core-core inflation rates to remain at 3.3% and 3.4%, respectively, in July. Higher readings support the BoJ hawks and a Q4 rate hike. Conversely, softer-than-expected core-core inflation may delay a BoJ policy move until early 2026.

USD/JPY Outlook: Economic Indicators and the BoJ

• Bullish Yen Scenario: Strong Japanese data or hawkish BoJ policy rhetoric could drag USD/JPY toward 145.
• Bearish Yen Scenario: Weaker Japanese data or dovish BoJ cues may send the pair toward 150.

US Services PMI, Labor Market Data, and the Jackson Hole Symposium in Focus

In the US, the Fed, crucial Services PMI, and labor market data will influence investor sentiment toward the Fed rate path.

Key events include:

• S&P Global Services PMI (August 21): Forecast to fall from 55.7 in July to 53.3 in August.
• Initial Jobless Claims (August 21): Expected to rise from 224k (week ending August 9) to 227k (August 16).
• Jackson Hole Symposium (August 21-22).
• Fed Chair Powell Speech (August 22).

Weaker-than-expected services sector and labor market data could boost expectations of multiple Fed rate cuts. A more dovish Fed rate stance would weigh on US Dollar demand and USD/JPY. However, a pickup in services sector activity and a resilient labor market may allow the Fed to take a less dovish policy stance. Fading expectations of multiple interest rate cuts would likely drive USD/JPY higher on stronger US dollar demand.

While the stats require consideration, speeches from the Jackson Hole Symposium and Fed Chair Powell’s speech will be key. Following a sharp rise in producer prices and higher import prices in July, remarks on inflation, the labor market, and the timeline for rate cuts will influence the pair’s near-term outlook.

Potential Price Scenarios:

• Bullish US Dollar Scenario: Upbeat US data or hawkish Fed commentary may drive USD/JPY toward the 149.358 resistance level and the 150 mark.
• Bearish US Dollar Scenario: Weaker US data or dovish Fed rhetoric may drag USD/JPY toward the 145 support level.

Short-term Forecast:

USD/JPY’s near-term outlook will hinge on key economic data and central bank policy guidance. Expectations of monetary policy divergence could weigh heavily on the USD/JPY pair.

USD/JPY Price Action

Daily Chart

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

A breakout above the 200-day EMA could pave the way toward the 149.458 resistance level. A sustained move through 149.458 may allow the bulls to target the August 1 high of 150.917.

On the downside, a drop below the 50-day EMA opens the door to testing the crucial 145 support level. If breached, the 142.5 mark would be the next key support level.

Key Takeaway

The USD/JPY could face another week of intense volatility as crucial data and policymakers drive sentiment toward Fed and BoJ policy moves. Monitoring real-time developments will be critical in navigating short-term movements.

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