The Japanese Yen (JPY) trades cautiously during Wednesday’s Asian session, though the absence of strong follow-through selling suggests limited downside for now. Hawkish commentary from the Bank of Japan’s (BoJ) September meeting Summary of Opinions continues to bolster expectations of policy normalization, offering support to the safe-haven JPY. This, coupled with rising geopolitical risks and the US government shutdown, underpins demand for the currency.
A stark policy divergence adds further strength to the Yen. Markets are increasingly betting on a near-term BoJ rate hike—potentially as early as October—while simultaneously expecting the US Federal Reserve (Fed) to cut rates twice before year-end. The narrowing US-Japan yield spread favors the Yen, keeping USD/JPY on the defensive after last week’s retreat from the 150.00 psychological level, the highest since early August.
Mixed Japanese Data, Yet Hawkish Pressure Persists
Japan’s September Manufacturing PMI was revised down to 48.5, the fastest contraction in six months. Still, the BoJ’s Tankan survey showed improving sentiment, with the Large Manufacturers’ Index rising from 13 to 14 for the July–September period. Combined with hawkish voices at the BoJ, this backdrop keeps expectations for a 25-basis-point hike alive and limits further JPY weakness.
US Factors Weigh on the Dollar
On the US side, political gridlock triggered a partial government shutdown after a Republican spending bill failed in the Senate. A prolonged standoff risks dampening growth, reinforcing expectations of Fed easing. CME FedWatch data shows traders now pricing in two rate cuts—one in October and another in December.
Meanwhile, JOLTS data revealed August job openings at 7.22 million, slightly above forecasts but insufficient to spark fresh USD demand. Attention now turns to Wednesday’s US economic releases, including the ADP private-sector employment report and ISM Manufacturing PMI. The Labor Department has warned that if the shutdown persists, Friday’s Nonfarm Payrolls (NFP) release will be suspended, leaving the Dollar vulnerable to Fed commentary.
Technical Outlook: USD/JPY Bearish Bias Below 147.00
Technically, USD/JPY struggles to sustain gains above the 200-day Simple Moving Average (SMA) near 148.40. A break below the 147.65 support could open the door to 147.20–147.15, with a decisive move under 147.00 shifting near-term bias firmly in favor of sellers.
On the upside, reclaiming the 148.40 SMA would put resistance at 149.00 in focus. A sustained move higher could trigger further gains toward 149.40–149.45 and re-expose the key 150.00 handle.
