USD/JPY gathers strength to near 156.50 on mixed Fed signals

• USD/JPY strengthens to around 156.50 in Monday’s early Asian session.

• Fed’s Susan Collins and Lorie Logan have expressed more cautious views on rates.

• Japan's Finance Minister said FX intervention is a possibility. 

The USD/JPY pair posts modest gains near 156.50 during the early Asian session on Monday. Less dovish Federal Reserve (Fed) expectations could provide some support to the US Dollar (USD) against the Japanese Yen (JPY). Traders will keep an eye on the US September Producer Price Index (PPI) report, which will be released later on Tuesday. 

Several Fed officials have adopted a more cautious tone, underpining the Greenback. Boston Fed President Susan Collins said that the current monetary policy is "in the right place," while Dallas Fed President Lorie Logan noted that the US central bank should hold the interest rates "for a time" to evaluate their economic impact. The latest Fed minutes from October 2025 also suggested that many policymakers leaned against a December cut.

However, New York Fed President John Williams stated on Friday that the Fed can still reduce the interest rates "in the near term" without putting its inflation goal at risk. This, in turn, could weigh on the USD against the JPY. Traders will take more cues from the mixed economic signals and the delayed release of key inflation data.

Furthermore, the upside for the pair might be limited as Japanese officials stepped up verbal intervention to stem the domestic currency's weakness. Japanese Finance Minister Satsuki Katayama said on Friday that intervention was a possibility to deal with excessively volatile and speculative moves. 

The Bank of Japan (BoJ) has kept rates steady at 0.5% since January. Nonetheless, BoJ Governor Kazuo Ueda has dropped strong hints of action in December or January next year. A Reuters poll showed last week that a narrow majority of economists expect the Japanese central bank to raise rates to 0.75% in December, while many market players previously anticipated a hike in either December or January.