Japanese Yen Pressured as USD/JPY Nears 148.00 Amid Policy Divergence

The Japanese Yen (JPY) slipped for a third consecutive session on Tuesday, with the USD/JPY pair climbing toward 147.70–147.75 during Asian trading. Despite a supportive backdrop of rising Bank of Japan (BoJ) rate hike expectations, the safe-haven currency underperformed as the US Dollar (USD) staged a modest rebound.

Policy Divide Between BoJ and Fed in Focus

Markets remain confident that the BoJ is preparing to continue normalizing monetary policy, supported by signs of stronger business investment and labor-driven inflationary pressures in Japan. However, the Federal Reserve (Fed) is widely expected to reduce borrowing costs as early as September, marking a stark divergence in outlook between the two central banks.

This divergence may cap further USD strength, especially as questions surrounding the Fed’s independence linger after President Trump’s controversial move to remove Governor Lisa Cook. Concerns about political interference in monetary policy have kept traders cautious.

Broader Market and Geopolitical Drivers

Asian equities opened higher, weighing on safe-haven flows toward the Yen. Data released Monday showed Japan’s capital spending rose 7.6% year-on-year in Q2, reinforcing optimism over corporate investment and bolstering expectations of continued BoJ tightening later this year.

Meanwhile, in the US, traders anticipate a series of high-impact economic releases this week, including ISM Manufacturing PMI, JOLTS Job Openings, ADP private-sector employment, and Friday’s Nonfarm Payrolls report. These figures will likely guide Fed policy expectations.

Geopolitical tensions, including Russia’s escalation in Ukraine and Middle East conflicts, have provided underlying support to the Yen. However, so far, risk-on sentiment has limited strong safe-haven demand.

USD/JPY Technical Outlook

Technically, the pair has held above its four-week trading range support at 146.70, with the move higher validating short-term buying interest. A decisive break below 146.70 could open the door to 146.20 and 146.00.

On the upside, the 148.00 mark remains the key barrier. A sustained breakout above this level could spark short-covering and send USD/JPY toward 148.75–148.80, close to the 200-day Simple Moving Average (SMA). Until then, gains may remain capped by selling pressure.

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