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The Japanese Yen faces intraday pressure due to a mix of bearish factors.
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Expectations for the BoJ to delay tapering beyond 2026 and improved market risk sentiment weigh on the JPY.
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Diverging policy outlooks between the BoJ and Fed are likely to limit significant gains in USD/JPY.
The Japanese Yen (JPY) remains under pressure against a recovering US Dollar (USD) on Tuesday, although hawkish expectations from the Bank of Japan (BoJ) are helping to limit deeper losses. Market participants are increasingly confident that the BoJ will continue its path toward policy normalization amid persistent inflationary pressures in Japan. These expectations were reinforced by BoJ Governor Kazuo Ueda’s comments in parliament, contrasting sharply with market speculation that the Federal Reserve (Fed) will cut interest rates in 2025. This policy divergence is providing some underlying support to the JPY.
Geopolitical concerns—such as the ongoing Russia-Ukraine conflict and renewed global trade tensions—are also contributing to safe-haven demand for the Yen. Still, uncertainty about the BoJ’s tapering strategy is restraining bullish momentum. Calls for a slower pace of bond purchase reductions beyond fiscal 2026 highlight the challenges the central bank faces in unwinding its massive stimulus program. Meanwhile, the USD’s modest recovery from multi-week lows is helping the USD/JPY pair hold above key support levels during early European trading.
BoJ in Focus: Policy Uncertainty Lingers Despite Hawkish Tone
- Former BoJ board member Makoto Sakurai said the central bank is likely to pause its quarterly bond purchase reductions from the next fiscal year to prevent sharp yield increases, which could destabilize the economy. Additionally, minutes from the BoJ’s May meeting with financial institutions revealed widespread calls to slow or maintain the current tapering pace through fiscal 2026. A full review of the tapering framework is expected at the BoJ’s upcoming policy meeting on June 16–17.
- Governor Ueda reiterated today that the BoJ would continue raising interest rates if inflation and economic activity align with forecasts. However, he emphasized the need for flexibility given high levels of uncertainty in global trade and economic conditions. On the US side, Fed policymakers such as Chicago Fed President Austan Goolsbee indicated that interest rate cuts would likely follow greater clarity on tariff policy. Current market pricing suggests a 70% chance of two 25-basis-point rate cuts from the Fed before year-end.
- The US ISM Manufacturing PMI, released Monday, showed the sector contracted for a third straight month, dropping to 48.5 in May—below both April’s 48.7 and expectations of 49.5. The weak data added to economic uncertainty in the US and capped further gains in the Dollar.
- Meanwhile, the second round of Russia-Ukraine peace talks failed to produce progress as hostilities intensified. Ukraine launched a surprise attack on Russian airbases, prompting a record-breaking response from Russia involving over 470 drones and numerous missiles. Russia rejected the idea of an unconditional ceasefire, demanding significant territorial concessions and limits on Ukraine’s military. These ongoing geopolitical tensions continue to drive safe-haven flows into the Yen, offsetting some of the bearish pressure.
USD/JPY Technical Analysis: Pair Struggles to Stay Above 143.00
From a technical standpoint, USD/JPY failed to maintain support above the 143.65–143.60 zone—aligned with the 200-hour Simple Moving Average (SMA)—which triggered bearish momentum. This area is now expected to act as immediate resistance. A breakout above could lead to a short-covering rally toward the 144.00 level, with further upside potential capped near the 144.40–144.45 supply zone.
On the downside, a move below 143.00 could find initial support near 142.40–142.35 (the Asian session low), followed by the 142.10 zone (last week’s swing low). A sustained decline below these levels could extend the pair’s bearish trajectory toward 141.60 and potentially sub-141.00 levels.
Traders now await US JOLTS Job Openings data and speeches from key FOMC members for near-term USD direction. However, the spotlight remains on Friday’s US Nonfarm Payrolls (NFP) report and the BoJ’s June policy meeting, both of which could set the tone for the next big move in USD/JPY.
