Tuesday tells the Japanese Yen more than next week will
- USD/JPY trades just above 154.00, down 1.22% on Monday.
- Japanese wage growth is seen at 3.9% YoY at 23:30 GMT tonight.
- Swaps price the Bank of Japan at 97% and the Fed at 59%.
USD/JPY trades just above 154.00 after giving up 1.22% on a Monday with American desks shut. Everything the pair has left to argue about arrives inside ten days, and the first of it lands tonight. Japanese wage data at 23:30 GMT is the number the Bank of Japan (BoJ) has made the condition of everything else.
Tonight is Tokyo's own test
Japanese labour cash earnings for July land at 23:30 GMT, seen at 3.9% YoY after 3.4%. The second estimate of Japanese Gross Domestic Product (GDP) follows at 23:50 GMT with growth seen at 0.4% on the quarter after 0.3% and the deflator at 2.6%, alongside a current account seen at ¥2.87 trillion after a ¥92.3 billion deficit.
The wage figure is the one that counts, and the useful comparison sits on the same release. Nominal pay seen at 3.9% against a deflator seen at 2.6% is a real gain, which is precisely what the hawkish case has been short of. The country that could not manufacture wage growth for a generation is scheduled to report some at half past eleven tonight.
What it cannot do is add to September. That hike is priced at close to 97% and there is no room above it. What tonight can move is October, where the pricing is thinner and where a board member has already raised the possibility of consecutive moves rather than the one-every-six-months cadence the BoJ has kept to. The ten-year Japanese Government Bond (JGB) yield cleared 3% on September 1 for the first time since 1996, so the bond market has already taken that side of it.
Two meetings, and the doubt has changed sides
The Federal Reserve decides on September 16 and the BoJ on September 18, forty-eight hours apart. Swaps have the Japanese quarter point at close to 97%. The Federal Reserve's own market pricing puts its quarter point at 59%, with the target band at 3.50% to 3.75% and the effective rate at 3.63%.
That is a reversal of how this pair has worked for years. The Yen leg was the one nobody could predict and the Dollar leg the one that moved on schedule. Going into a fortnight with both banks live, Tokyo is the near certainty and Washington is the open question.
The size of the gap is not the story. Tokyo's policy rate is 1% against a Federal Reserve midpoint of 3.625%, and delivering both hikes moves that by nothing worth trading. What is being traded is which of the two paths bends first, and by how much after the meeting rather than at it.
There is nothing left to price on the Yen side
Friday showed what a decided market looks like from the other direction. US Nonfarm Payrolls (NFP) printed 162K against a 53K consensus, USD/JPY spiked to just under 157.00 within seconds of the 12:30 GMT release, and the entire move was gone inside the hour. Monday then took 1.22% out of the pair on a session when the country that produced those payrolls was shut.
So the arithmetic of the week is one-sided. There are three points of room left in the Japanese pricing and forty-one in the American, which leaves Friday's inflation print as the only scheduled number capable of moving this pair by more than it moves back.
The rest of the week is American
The US ADP employment reading lands Tuesday at 12:15 GMT. The US Producer Price Index (PPI) follows Thursday at 12:30 GMT, seen at 0.4% on the month after a flat July and 5.3% YoY after 4.7%, with the core measure at 4.6% YoY after 4.2%. Initial jobless claims land alongside them, seen at 205K after 206K.
The US Consumer Price Index (CPI) arrives Friday at 12:30 GMT, seen at 0.4% on the month after 0.1%, with the annual rate steady at 3.4% and the core measure easing to 2.4%. Michigan sentiment and the one-year inflation expectations measure, last at 4%, follow at 14:00 GMT. A print at consensus firms a hike already priced at 59% and hands the Dollar leg the only thing that has gone its way in a fortnight.
Levels and bias
Resistance: The 154.50 area caps the bounce, and Monday's rebound stalled short of 155.00 before handing most of it back. Above that, 156.00 is Monday's open and sits just beneath the session high. The 200-day Exponential Moving Average (EMA) near 158.00 broke on September 3 and now caps any retracement, with the 50-day EMA just under 159.50 above it.
Support: The 154.00 handle is the whole map. Monday's low sits a few pips above it and the pair spent the European evening within forty pips without breaking it. Beneath it the chart carries no traded structure at all, which leaves 153.50 and 153.00 as round figures rather than tested levels.
Bias: Bearish while 155.00 caps. The daily Stochastic Relative Strength Index (Stoch RSI) sits at 82 with price at the lows of its range, so no oversold reading is available to support a bounce and the oscillator has its whole range left to give back. The intraday measure near 58 is mid-range after the afternoon rebound faded, which is neither help nor hindrance. A daily close above 155.50 invalidates the call. A soft wage print tonight does it faster, and a hot American inflation number on Friday does it with more staying power.
USD/JPY daily chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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