The Japanese yen continues to struggle with strengthening. Investors remain concerned that domestic political instability and economic challenges triggered by US tariffs may push the Bank of Japan to delay raising interest rates. At the same time, the prevailing risk appetite in global markets reduces the yen's appeal as a safe-haven asset.
The Liberal Democratic Party (LDP) leadership elections, scheduled for October 4, may play a key role in determining the timing of the Bank of Japan's next rate hike. One frontrunner, Shinjiro Koizumi, stressed the importance of fiscal discipline but noted that sustainable economic growth is the foundation for a balanced policy. Another candidate, Yoshimasa Hayashi, urged the government to refrain from issuing bonds to cover the budget deficit, while Sanae Takaichi warned of the risks of rising yields under fiscal policy.
Following a series of record highs in Wall Street indices last week, Asian stock markets continue to rise, further reducing the yen's safe-haven appeal. Two Bank of Japan board members opposed the decision to keep the interest rate at 0.5%. Meanwhile, BOJ Governor Kazuo Ueda stated his readiness to raise rates further if the economy and inflation evolve in line with forecasts. Investors now price in the likelihood of a 25-basis-point rate hike by the Bank of Japan in October, which sharply contrasts with the dovish stance of the US Federal Reserve.
Last Wednesday, the US central bank cut interest rates for the first time since December and signaled the possibility of further cuts before year-end. Traders believe rates will be lowered faster than the Fed currently projects.
Geopolitical risks remain acute and could support the yen as a safe-haven currency. NATO countries accused Russia of violating the airspace of Estonia, Poland, and Romania—allegations Moscow denies, calling them baseless. At the same time, Hamas intensified attacks by launching several rockets toward Israel amid expanded Israel Defense Forces operations in Gaza.
From a technical perspective, USD/JPY may find support near last Friday's low, following the BOJ decision, at the 100-day EMA around 147.20. The next level is the round 147.00, below which prices could accelerate downward toward support at 146.20.
On the other hand, the round level of 148.00 has become the immediate barrier before the 148.40–148.60 level, which sits just below the key 200-day simple moving average (SMA) near 148.60. Sustained buying above this zone would lift USD/JPY toward the round 149.00 level, targeting the monthly high around 149.15–149.20.
