USD/JPY stabilises around 158.00 during the early European session on Monday. BoJ’s Governor indicates that underlying inflation is “quite close” to the central bank’s 2% target. Fed Chairman Warsh states that he does not “prejudge meetings. The USD/JPY pair is trading in a stable manner around 158.00 during the early European session on Monday. Traders are reducing their expectations for Federal Reserve rate hikes in light of the recent robust US inflation data. The Japan’s National Consumer Price Index inflation data will take center stage later on Friday. Bank of Japan Governor Kazuo Ueda stated on Monday that underlying inflation is “quite close” to the central bank’s 2% target, with robust global AI demand contributing to inflationary pressures stemming from a tight labour market, indicating potential for additional rate hikes. Ueda stated that raising interest rates at a suitable pace would assist in preventing surges in bond yields. Many market participants anticipate that the Japanese central bank will maintain interest rates at 1.25%, while also signalling the possibility of an increase to 1.5% as soon as December, as reported.
At the IMF annual meetings in Bangkok on Friday, Fed Chair Kevin Warsh offered no clues about future rate decisions. “We removed a dose of accommodation about a month ago,” said Warsh. “I don’t prejudge meetings. I don’t believe in saying now what I might do at the meetings that we have in the balance of this year,” he added. Fed funds futures indicate an implied probability of 83.9% that the Federal Reserve will maintain current interest rates during its upcoming two-day meeting on October 28, reflecting minimal change since Friday, as per the CME Group’s FedWatch tool. Analysts highlight a firmer tone from the Bank of Japan, noting that Governor Kazuo Ueda now judges underlying inflation to be “quite close” to the 2% target, supported by tight labour markets and strong global AI demand as sources of price pressure. Danske adds that Ueda “warned that failing to raise rates at an appropriate pace could push long-term bond yields higher,” underscoring the risks of moving too slowly.
Looking ahead to the BoJ’s next meeting, which concludes on 30 October 2026, the bank points out that markets expect policy rates to remain at 1.25%, but will be watching closely for any guidance that keeps a hike to 1.5% as early as December “on the table.” FXS Speechtracker at 7/10 is slightly below Ueda’s 7.4/10 average, but the emphasis on “underlying inflation near 2%” and a “positive loop” of wages, prices, and robust global demand marks a mild hawkish tilt versus past caution. The focus on anchoring core inflation near 2%, demand-led price gains, and a tight labor market suggests the Bank of Japan is more confident that the 2% goal is becoming sustainable, which is Yen-supportive at the margin. At the same time, Ueda stresses no shift in the fundamental bond taper approach and refuses to preannounce emergency JGB operations, signaling a desire to let long-term yields rise “steadily” alongside any future policy-rate hikes. The message that accommodative conditions will persist, but that miscalibrated policy could push long-term rates higher, frames a gradual normalization path that can underpin the Yen while keeping JGB volatility contained, limiting an immediate bullish impulse for the currency.
In the daily chart, USD/JPY exhibits a constrained tone as the spot remains beneath the 100-day simple moving average, even while stabilising above the 20-day Bollinger SMA. The pair has rebounded from the lower band, yet the upper band and the proximate 100-day SMA above indicate that rallies are likely to encounter resistance. Meanwhile, the Relative Strength Index at 52.35 suggests only modest, neutral-to-slightly positive momentum. On the topside, immediate resistance aligns first at the upper Bollinger band near 158.85, followed by the 100-day SMA at 159.45, a level that would need to be reclaimed to alleviate the broader downside pressure. On the downside, initial support is observed at the 20-day Bollinger SMA around 158.00, with a break exposing the lower band support at 157.10, where a deeper pullback could attempt to stabilise.
