USD/JPY struggles to extend winning streak, focus shifts to US CPI

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The USD/JPY pair struggles to extend its winning streak for the fourth trading day on Wednesday. The pair faces barriers near a fresh weekly high of 152.17 posted on Tuesday.

USD/JPY strives to extend its upside move above the weekly high of 152.17.
Japan PM Takaichi is expected to announce raise fiscal spending beyond last year’s 13.9 trillion yen budget.
Investors await the delayed US CPI data for September.

The USD/JPY pair struggles to extend its winning streak for the fourth trading day on Wednesday. The pair faces barriers near a fresh weekly high of 152.17 posted on Tuesday. The outlook of the pair remains firm as market experts believe newly elected Japan’s Prime Minister Sanae Takaichi to follow former PM Shinzo Abe’s economic policies.

According to a report from Reuters, Japan PM Takaichi prepares an economic stimulus package that might exceed ($92 billion) to help households cope with persistent inflation.

Such a scenario would provide relief to households from sticky price pressure while maintaining economic momentum.

On the monetary policy front, a poll from Reuters has shown that the 45 of 75 economists (60%) expect the Bank of Japan (BoJ) to raise rates by 25 basis points (bps) this quarter. The poll also showed that nearly 96% of economists expect borrowing costs to increase at least 25 bps by the end of March 2026.

Meanwhile, the US Dollar (USD) trades higher amid receding trade frictions between the United States (US) and China. During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, revisits weekly high near 99.10.

Going forward, investors will focus on the US Consumer Price Index (CPI) data for September, which will be published on Friday. The inflation data will significantly influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.