Japanese Yen slips from one-month high as USD recovers, with Fed and BoJ still in focus

• USD/JPY recovers from a low last seen over a month ago, reversing Asian session losses as the USD edges higher.
• Renewed USD demand, driven by geopolitical risks and hawkish Fed expectations, lends support to the pair.
• Japan’s National CPI reinforces expectations of a BoJ rate rise, curbing JPY losses and restraining the pair’s advance.

Japan’s consumer inflation figures, released earlier on Friday, initially sent USD/JPY towards 156.00 during the Asian session, its lowest level in over a month. The pair has since recovered, but is struggling to extend its advance above 157.00 and remains set for substantial losses over the week.

September’s National Consumer Price Index (CPI) rose to 2.1% YoY from 1.9% in the previous month, according to the latest figures from Japan’s Statistics Bureau. The core measure excluding volatile fresh food prices also increased by 2.1%, its strongest reading since December 2025. Meanwhile, CPI excluding both fresh food and energy reached a 10-month high of 2.5%, strengthening the case for the Bank of Japan (BoJ) to continue raising interest rates. The Japanese Yen (JPY) initially gained appreciably in response. That reaction soon faded, however, as a modest recovery in the US Dollar (USD) drew buyers back into USD/JPY at lower levels.

Traders appear convinced that the Federal Reserve (Fed) will raise borrowing costs again this year, despite recent comments from officials suggesting there is no immediate need for a rate increase. The CME Group’s FedWatch Tool puts the probability of a December hike at around 80%. Inflation risks arising from high energy prices further support expectations of additional Fed tightening. At the same time, escalating tensions in the Middle East sustain the geopolitical risk premium, renewing demand for the safe-haven US dollar and supporting USD/JPY. Further gains nevertheless appear constrained, with traders seemingly reluctant to commit ahead of next week’s major central bank events.

On 28 October, the Fed will deliver its interest rate decision after a two-day monetary policy meeting. The closely watched Bank of Japan (BoJ) meeting follows on 29–30 October. Next Thursday also brings the advance estimate of US Q3 GDP and the US Personal Consumption Expenditures (PCE) Price Index, releases that will influence USD demand and give USD/JPY fresh direction. Meanwhile, market participants are likely to stay on high alert amid speculation that further JPY weakness could prompt direct currency intervention by the Japanese authorities. That possibility could place an additional ceiling on the pair’s gains and calls for caution among aggressive buyers.

USD/JPY on the daily chart

USD/JPY Remains Constrained Below Key Technical Levels

With USD/JPY trading beneath its 200-day Simple Moving Average (SMA) at 158.55, the near-term outlook remains constrained. The pair is also below the 23.6% Fibonacci retracement at 157.56, indicating that selling pressure at higher levels is frustrating recent efforts to re-establish the broader uptrend.

The 38.2% retracement at 156.68 offers the first downside support, ahead of the 50.0% level at 155.98. Further Fibonacci support lies at 155.27 and 154.26, with the swing low near 152.97 providing a more distant structural floor.

(The technical analysis of this story was written with the help of an AI tool. Know more.)