• USD/JPY reverses from a four-week low after the US jobs revision sparks a US Dollar rebound.
• The BLS benchmark revision showed payrolls were overstated by 911,000 jobs through March 2025, confirming deeper labor market weakness.
• Markets remain almost fully priced for a 25 bps Fed cut next week, with some probability assigned to a larger 50 bps move depending on upcoming inflation data.

The Japanese Yen (JPY) trims gains against the US Dollar (USD) on Tuesday, with USD/JPY climbing back above the 147.00 psychological mark after briefly hitting its lowest level since August 14, around 146.31. At the time of writing, the pair is trading near 147.30, recovering as the Greenback stages a modest rebound from seven-week lows.

The move came after the US Bureau of Labor Statistics (BLS) released its preliminary Nonfarm Payrolls (NFP) benchmark revision, which showed payrolls were overstated by 911,000 jobs through March 2025, equivalent to a 0.6% downward adjustment. The revision confirmed that the labor market has been cooling more sharply than previously reported, further cementing expectations of a Federal Reserve (Fed) interest rate cut at its September 16-17 meeting.

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is staging a modest recovery after falling to its weakest level in seven weeks earlier in the day. At the time of writing, the index is trading around 97.60, supported by short-covering flows following the BLS revision. Despite the rebound, the DXY remains under pressure from a dovish Fed outlook, with markets almost fully pricing a 25 bps cut next week and assigning some probability to a larger 50 bps move.

The upcoming Producer Price Index (PPI) on Wednesday and Consumer Price Index (CPI) on Thursday will be critical in shaping expectations, as softer readings would reinforce the case for deeper easing, while any upside surprise could bolster the US Dollar’s recovery.

Earlier in the session, the Yen drew support from a Bloomberg report suggesting that Bank of Japan (BoJ) policymakers still see scope for a rate hike before year-end, despite political uncertainty following Prime Minister Ishiba’s resignation. The headlines briefly pushed USD/JPY lower, but the Greenback’s rebound after the US jobs revision erased most of the intraday decline. Looking ahead, traders will closely watch the upcoming BoJ policy meeting on September 18-19, where the central bank is widely expected to hold rates steady at 0.50%.