On Thursday, the Japanese yen continued to decline. Earlier this week, Japan's Finance Minister, Katsunobu Kato, emphasized that the government would closely monitor foreign exchange movements, underscoring the importance of exchange rates that reflect real economic fundamentals.
At the same time, the unexpected victory of Sanae Takaichi in last Saturday's Liberal Democratic Party (LDP) leadership race paves the way for her potential appointment as Japan's first female prime minister. Her win also fuels speculation about a more expansionary fiscal approach under her leadership.
In response, traders have priced in just a 26% probability that the BoJ will raise its key interest rate at the next policy meeting on October 30 — nearly half the 60% likelihood expected as recently as last Friday. This sharp repricing has weighed on the yen since the start of the week.
Takaichi's economic advisors, Etsuro Honda and Takuji Aida, have suggested that the new prime minister may allow one additional rate hike in December or January, although further policy steps remain uncertain.
Meanwhile, Japanese inflation has remained at or above the BoJ's 2% target for more than three years, and the economy continues to grow. This preserves hopes that the BoJ could hike rates again before the end of the year.
On the U.S. side, minutes from the Federal Reserve's September meeting, released Wednesday, showed near-unanimous agreement among members to cut rates due to concerns about labor market weakness and a more balanced inflation outlook. However, policymakers remain divided about whether one or two additional rate cuts will be necessary before year-end.
Overall, the tone of the meeting was cautious, signaling the Fed's continued commitment to easing policy.
The CME FedWatch Tool still reflects high market expectations for a 25-basis-point rate cut at the Fed's remaining meetings in October and December.
Meanwhile, U.S. President Donald Trump announced on Wednesday that Israel and Hamas had agreed to the first phase of his proposed 20-point peace plan, including a ceasefire and the release of hostages and prisoners — a development which reduces the attractiveness of traditional "safe-haven" assets.
From a technical perspective, the daily Relative Strength Index (RSI) has entered overbought territory, discouraging traders from opening new bullish positions.
However, any pullback is likely to attract new buyers and remain shallow near the psychological level of 152.00. A break below that level could trigger technical selling, potentially pulling spot prices down toward strong horizontal support at 151.00.
On the upside, the round number level of 153.00 serves as immediate resistance. A sustained move above that level would confirm a bullish continuation, pushing USD/JPY even higher.
