USD/JPY steady as mixed US data, BoJ hawkishness shape sentiment

• The US Dollar stabilizes after a series of mixed macroeconomic indicators in the United States.
• Activity and employment data keep the Federal Reserve in a cautious stance.
• The Japanese Yen slightly outperforms, supported by weaker risk appetite and a more restrictive bias from the BoJ.

USD/JPY trades around 156.60 on Wednesday at the time of writing, virtually unchanged on the day, as the US Dollar (USD) struggles to extend its rebound following mixed US economic releases, while the Japanese Yen (JPY) benefits from a more defensive tone in Asian markets.

In the United States (US), the latest activity indicators send mixed signals. The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) rose to 54.4 in December, up sharply from 52.6 previously and above market expectations, pointing to improved momentum in the services sector. New Orders also increased, reinforcing the view of firmer demand toward year-end. By contrast, the Prices Paid Index eased to 64.3, suggesting some moderation in inflationary pressures, while the Employment Index edged up only modestly to 52.

The US labor market continues to present a more nuanced picture. Job Openings from the Job Openings and Labor Turnover Survey (JOLTS) fell to 7.14 million in November, below expectations, confirming a gradual cooling in labor market conditions. At the same time, the Automatic Data Processing (ADP) Research Institute report showed private-sector payrolls rising by just 41,000 in December, weaker than forecast, despite a rebound after November’s contraction. Taken together, these data support a cautious approach by the Federal Reserve (Fed), with investors continuing to price in a very gradual path of rate cuts in 2026.

Against this backdrop, the US Dollar finds only limited short-term support. The US Dollar Index (DXY) holds around 98.70 after rebounding from daily lows, reflecting mainly position adjustments following the macroeconomic releases rather than a fundamental shift in trend.

On the Japanese side, the JPY shows modest outperformance against the Greenback. In Asia, the currency benefits from a deterioration in risk appetite, fueled by rising diplomatic tensions between China and Japan after Beijing announced restrictions on exports of dual-use goods to Japan. This geopolitical escalation between two major Asian economies has renewed demand for safe-haven assets.

Additional support for the Japanese Yen comes from recent remarks by Bank of Japan (BoJ) Governor Kazuho Ueda, who reiterated the institution’s commitment to further monetary tightening. Although uncertainty remains regarding the exact timing of the next rate hike, this hawkish bias continues to provide structural support to the Japanese currency. In this environment, USD/JPY remains confined to a broad trading range, as markets balance a cautious US monetary policy outlook with factors favoring the Japanese Yen.