158.00: Yen remains pinned nearby ahead of Japan’s inflation figures

158.00 remains the closing reference for USD/JPY. The pair again finished near that level, within its range since 1 October.
Under 5% is priced into swaps for a BoJ hike on 30 October, against nearly 80% for 18 December.
Thursday brings Japan's national CPI release before the BoJ decides policy on 30 October.

USD/JPY fell from about 158.50 on Tuesday. After reaching the session low, it retraced roughly half the decline. Lower Crude Oil prices and Dollar weakness elsewhere offered the Yen little support, leaving the pair near its usual closing levels for most of October.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Swaps indicate a less than 5% probability of a rate increase from 1.25% on 30 October, compared with about 80% for 18 December. That was how traders priced Monday's remarks to parliament by Bank of Japan (BoJ) Governor Ueda, who said underlying inflation was very close to the 2% target. For Yen buyers, those prices leave no BoJ hike to factor in before December.

The rise just above 158.50 on Tuesday took USD/JPY to its highest level since Finance Minister Katayama's 15 October warning that Japan was prepared to intervene in the currency market again. That high proved unsustainable. Prime Minister Takaichi, meanwhile, denied responsibility for the Yen's weakness.

2.1% Japan CPI Forecast in Focus

At 23:50 GMT on Tuesday, Japan releases September trade data. Exports are projected to rise 20.1% year on year, following 19.3%. Thursday's national CPI excluding fresh food, due at 23:30 GMT, is expected at 2.1%, up from 1.7%. The two inflation readings sit on either side of the BoJ's 2% target.

Friday's University of Michigan release at 14:00 GMT is expected to show one-year inflation expectations holding at 4.7% and five-year expectations at 3.5%. These are the final US inflation figures ahead of the Fed's 28 October decision. The BoJ announces its decision two days later.

158.00 Anchors October Trading

Since 1 October, no daily close has been more than 75 pips from 158.00. The 50-day Exponential Moving Average (EMA) lies only a few pips from that level. Just above 157.50 sits the 200-day EMA, while October's trading range extends from slightly below 157.00 to slightly below 159.00.

USD/JPY: Daily Price Chart

Japanese Yen: Key Questions Answered

Key Drivers of the Japanese Yen

Among the world's most actively traded currencies, the Japanese Yen (JPY) takes its broad direction from Japan's economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders' appetite for risk, alongside other factors.

Bank of Japan Policy and the Yen

Currency control forms part of the Bank of Japan's mandate, making its policy actions important for the Yen. Direct intervention in currency markets has occurred on occasion, usually to weaken the currency. Such action is infrequent, however, given political concerns among Japan's principal trading partners. Between 2013 and 2024, the BoJ's ultra-loose monetary stance widened the policy gap with other major central banks, driving Yen depreciation against its main peers. The more recent gradual withdrawal of that policy has provided some support for the currency.

US-Japan Bond Yield Gap and the Yen

By maintaining ultra-loose monetary policy over the past decade, the BoJ increasingly diverged from other central banks, notably the US Federal Reserve. The resulting widening of the yield gap between 10-year US and Japanese bonds favoured the US Dollar over the Japanese Yen. That gap is now narrowing as the BoJ follows its 2024 decision to move gradually away from ultra-loose policy and other major central banks cut interest rates.

Risk Sentiment and Demand for the Yen

Investors often regard the Japanese Yen as a safe haven, turning to it during market stress for its perceived stability and reliability. In turbulent conditions, this tendency makes the Yen more likely to appreciate against currencies considered riskier investments.

158.00: Yen remains pinned nearby ahead of Japan’s inflation figures

2.1% Japan CPI Forecast in Focus

158.00 Anchors October Trading

USD/JPY: Daily Price Chart