The Japanese yen continues to trade with a bearish bias on Wednesday, hovering near a one-month low against the US dollar. Heightened domestic political tensions and mixed signals from the Bank of Japan (BoJ) have weighed on sentiment, while the dollar remains supported by firm Treasury yields and safe-haven flows.
USD/JPY is edging closer to the 149.00 psychological level, buoyed by follow-through strength in the greenback. However, diverging monetary policy expectations between the BoJ and the Federal Reserve are keeping traders cautious ahead of key US macro releases, including Friday’s Nonfarm Payrolls report.
Political instability adds pressure to the yen
Uncertainty surrounding Japan’s political landscape has intensified after Hiroshi Moriyama, secretary general of the ruling Liberal Democratic Party (LDP), announced plans to resign. Local media also reported that former Prime Minister Taro Aso is expected to call for a new LDP presidential election, adding to the volatility.
This political backdrop has further undermined the yen, which was already struggling to attract buyers amid ambiguity over the BoJ’s rate hike trajectory.
BoJ signals remain mixed as Fed outlook diverges
BoJ Deputy Governor Ryozo Himino reiterated on Tuesday that rate hikes should continue, but warned of persistent global economic uncertainty. Governor Kazuo Ueda followed up on Wednesday, stating there is no change in the bank’s stance and that policy decisions will be data-dependent.
Despite the cautious tone, investors remain optimistic that Japan’s tight labor market and rising wages could drive inflation higher, potentially prompting the BoJ to normalize rates before year-end. In contrast, markets are pricing in a 90% probability of a 25-basis-point rate cut by the Fed at its September 17 meeting, reinforcing the policy divergence.
USD/JPY eyes breakout above 149.00
The dollar is trading with a positive bias for the second consecutive session, supported by a rebound from August’s swing low and a broader flight to safety. USD/JPY is now testing resistance near the 200-day Simple Moving Average (SMA), with a sustained move above 149.00 likely to confirm a bullish breakout.
Technical indicators are turning constructive. Daily chart oscillators are gaining traction, suggesting momentum could carry the pair toward the next resistance zone at 149.55–149.60. A further extension may target the 150.00 psychological level, followed by the August high near 151.00.
On the downside, initial support lies at 148.30–148.25, with a break below 148.00 exposing 147.40 and 147.00. A failure to hold these levels could shift sentiment back in favor of bearish traders, with downside risk extending toward 146.20 and 146.00.
