Japanese Yen draws support from hot Tokyo CPI as USD bulls await US NFP report
- USD/JPY attracts some sellers during the Asian session as hot Tokyo CPI lifts the JPY.
- Intervention risks further underpin the JPY, though a bullish USD supports the major.
- Traders also seem hesitant and opt to wait for the release of the key US NFP report.
The USD/JPY pair edges lower during the Asian session on Friday, currently trading below the 158.00 mark, though it remains near the weekly high touched the previous day.
Data released earlier today showed that consumer inflation in Tokyo – Japan's capital city – accelerated in September. This comes on top of the Bank of Japan's (BoJ) Summary of Opinions, which showed that policymakers debated the need for additional rate hikes to adjust accommodative financial conditions, and offers some support to the Japanese Yen (JPY). Adding to this, traders remain on high alert amid speculation that authorities will step in again to boost the JPY, which, in turn, is weighing on the USD/JPY pair.
The downside, however, seems cushioned amid the prevailing strong bullish sentiment surrounding the US Dollar (USD). Despite receding bets for an October Federal Reserve (Fed) rate hike, inflationary concerns stemming from volatile energy prices help limit the overnight pullback in US bond yields from multi-year highs. This, along with persistent geopolitical uncertainties, keeps the safe-haven USD well supported near its highest level since March 2025 and might continue to act as a tailwind for the USD/JPY pair.
Traders might also refrain from placing aggressive directional bets and opt to wait for the release of the crucial US monthly employment details, due later during the North American session. The popularly known Nonfarm Payrolls (NFP) report will play a key role in influencing market expectations about the Fed's future policy path, which, in turn, will drive the USD and provide some meaningful impetus to the USD/JPY. Nevertheless, spot prices remain on track to register modest gains for the third consecutive week.
USD/JPY 4-hour chart
Technical Analysis
The USD/JPY pair holds well above the 100-period Simple Moving Average (SMA) on the 4-hour chart, suggesting a constructive near-term bias as buyers maintain control over the broader uptrend. The said SMA at 156.52 should act as immediate strong support, where a break lower would start to weaken the bullish structure and expose deeper retracements. On the top side, bulls might now await acceptance above the 159.00 mark before positioning for an extension of a three-week-old uptrend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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