Japanese Yen struggles near two-week low vs USD after BoJ Governor Ueda’s comments

• USD/JPY maintains a strong bid tone in the wake of the BoJ’s dovish rate hike on Friday.
• BoJ Governor Ueda’s readiness to raise interest rates further fails to impress JPY bulls.
• The Fed’s hawkish outlook revives USD demand, providing an additional boost to the pair.

The USD/JPY pair trims a part of strong intraday gains to a two-week high, though it holds comfortably above mid-156.00s during the post-meeting Bank of Japan (BoJ) press conference.

The immediate market reaction to a surprisingly dovish decision seems to be fading after Governor Kazuo Ueda reiterated that the central bank will keep raising rates in response to the economy and prices. However, the BoJ's rate hike earlier today was accompanied by two dissenters, who argued for patience in pushing up borrowing costs.

Yen under pressure as BoJ hike exposes board divisions on inflation path

Analysts at ING note that the Bank of Japan has raised its key rate “by 25bp to 1.25% in a split vote, with Toichiro Asada and Ayano Sato dissenting.” They highlight that Japan’s core inflation measure “remained above 2% throughout 2025,” and that the BoJ “expects inflation to stay above target in the coming years,” meaning the latest move “acknowledges persistent upside inflation risks.”

However, ING also underscores the policy tensions on the board. The two dissenting members, “appointed by Prime Minister Sanae Takaichi,” argued that “without a renewed pick-up in inflation, a rate hike at this meeting was unnecessary.” ING cautions that this stance “could make it harder for the board to reach consensus on another hike this year,” reinforcing the sense that, despite the rate increase, the BoJ’s path toward further tightening remains contested.

Adding to this, data released earlier today showed that Japan's National Consumer Price Index (CPI) held steady in August and core inflation remained below the BoJ’s 2% annual target. This, in turn, tempered expectations of a more aggressive tightening, which continues to undermine the Japanese Yen (JPY) and support the USD/JPY pair.

Meanwhile, the US Dollar (USD) attracts some dip-buyers following the previous day's modest pullback from the highest level since late July in the wake of the Federal Reserve's (Fed) hawkish outlook. In fact, the US central bank raised interest rates for the first time in over three years on Wednesday and projected one more rate increase by this year.

Moreover, inflation risks stemming from persistently higher energy prices underpin prospects for further Fed tightening. This, along with escalating tensions in the Middle East, keeps the geopolitical risk premium in play and turns out to be another factor underpinning the safe-haven Greenback, which further contributes to the USD/JPY pair's bid tone.

USD/JPY 4-hour chart

Technical Analysis

The USD/JPY keeps a bullish near-term bias following an intraday breakout above the 156.60 confluence – comprising the 100-period Simple Moving Average (SMA) and the 50.0% Fibonacci retracement. Further up, resistance is seen at the 61.8% Fibo. at 157.48, followed by the 78.6% level at 158.74, ahead of the cycle high at 160.35.

On the downside, immediate support is located at the 50.0% retracement at 156.60, closely backed by the 100-period SMA at 156.42; a deeper pullback would expose the 38.2% retracement at 155.71, then the 23.6% level at 154.62, before the structural Fibonacci anchor near 152.85.

(The technical analysis of this story was written with the help of an AI tool. Know more.)