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The Japanese Yen gains traction against the US Dollar for a second consecutive session on Wednesday.
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Continued expectations of Bank of Japan policy normalization support the JPY.
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Softer US inflation data fuels speculation of two Fed rate cuts in 2025, weighing on the USD.
The Japanese Yen (JPY) continues to strengthen against the US Dollar (USD) for a second day on Wednesday, pushing the USD/JPY currency pair toward the 147.00 mark during the Asian trading session. The move is largely supported by hawkish remarks from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, who reinforced the possibility of further policy normalization. These comments helped the Yen extend its recovery from recent one-month lows.
Meanwhile, Tuesday’s softer-than-expected US inflation figures renewed market expectations for at least two Federal Reserve (Fed) rate cuts this year. This shift in sentiment has placed the US Dollar under pressure, weakening it from recent highs reached on April 10, and benefiting lower-yielding currencies such as the Yen. That said, investor sentiment remains buoyed by the optimism surrounding a 90-day tariff truce between the US and China, which could cap further gains for the safe-haven JPY.
Japanese Yen Supported by Expectations of Additional BoJ Rate Hikes in 2025
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Japan’s Producer Price Index (PPI) for April increased by 0.2%, with the annual rate easing slightly to 4% from 4.2%. The data had minimal immediate impact, but the Yen remains bolstered by expectations of further BoJ tightening.
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BoJ Deputy Governor Uchida reiterated that rate hikes will proceed if economic and inflation trends align with the bank’s projections. He anticipates Japan’s growth to slow modestly before rebounding in line with global recovery trends.
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In contrast, investor expectations for aggressive Fed easing have been dialed back amid diminishing recession risks. Nonetheless, markets still anticipate a cumulative 56 basis points in rate reductions this year, with Tuesday’s soft CPI data reinforcing that view.
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According to the US Bureau of Labor Statistics (BLS), headline CPI eased to 2.3% year-over-year in April, down from 2.4%. Core CPI, which excludes food and energy, rose 2.8% annually, in line with forecasts.
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As a result, the US Dollar remains subdued below its recent peak, exerting downward pressure on the USD/JPY pair. However, positive developments in US-China trade discussions may deter excessive demand for the JPY.
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US President Donald Trump stated in a Fox News interview that US-China relations are “excellent”, building on progress from the weekend negotiations in which both countries agreed to a 90-day pause on new tariffs.
USD/JPY Technical Outlook: Support Seen Near 146.60–146.55 Fibo Zone
From a technical standpoint, the pair’s recent breakout above the 200-period Simple Moving Average (SMA) on the 4-hour chart, along with favorable oscillator readings on the daily chart, suggests continued upside potential. A pullback below the 147.00 threshold may still present a buying opportunity near the 146.60–146.55 area, aligning with the 23.6% Fibonacci retracement of the rally from April’s year-to-date low.
A sustained break below this support zone could trigger additional selling pressure, potentially dragging the pair toward 146.00, then to the 145.40 area (38.2% Fibo), and further to the 145.00 psychological level. A decisive breach of the 144.80–144.75 area—coinciding with the 200-period SMA—would invalidate the near-term bullish outlook.
On the upside, immediate resistance is expected near the 147.65 level. A breakout above this area could pave the way for a move toward the 148.00 handle, followed by the 148.25–148.30 region. A continued advance could retest the recent one-month high near 148.65. A firm push beyond this point would likely encourage bullish momentum, targeting the 149.00 level and potentially extending toward the 149.65–149.70 zone, with scope for a move toward the 150.00 psychological mark.
