The Japanese Yen hovers near multi-month lows, with central bank policy uncertainty becoming a key variable

On Wednesday, during Asian trading, the Japanese Yen (JPY) continued its weakness against the US dollar, oscillating repeatedly in the low range since the end of February. Market participants generally believe that the core factors suppressing the Yen are Japan’s expansionary fiscal stance and the ambiguity of the central bank’s policy path.

Fiscal Stimulus and Divergence of Central Bank Expectations Drive Yen Lower

Japan’s Prime Minister Fumio Kishida’s proactive fiscal policy is shaking market expectations of the Bank of Japan (BoJ) tightening. Recently, a group of Japanese ruling party legislators proposed drafting an additional budget of over 25 trillion yen. This large-scale fiscal move directly impacted the bond market—40-year Japanese government bond yields hit a record high.

Kishida previously emphasized that Japan still faces deflation risks and expressed reservations about raising interest rates. She explicitly stated her hope for the central bank and government to work together to stimulate the economy, rather than simply raising rates to address price pressures. These signals continue to weigh on the Yen—investors are confused about the central bank’s policy direction, supporting short positions on the Yen.

Intervention Expectations and Safe-Haven Sentiment Balance

Although the Yen’s decline is evident, short-selling forces are also constrained. Increasing market signals suggest authorities may intervene to stabilize the exchange rate, discouraging overly aggressive short positions. Meanwhile, weakening global risk sentiment provides some support to the safe-haven Yen. Coupled with generally sluggish stock markets, this further limits the Yen’s downside.

At the same time, the US dollar (USD) itself lacks buying support. Concerns over the US government shutdown affecting economic momentum, along with Fed officials’ disagreements on rate cuts (Vice Chair Philip Jefferson advocating cautious progress, and Board member Christopher Waller continuing to defend rate cuts), are weakening the dollar’s attractiveness. This situation further compresses the upward potential of USD/JPY.

Technical Outlook Indicates Further Upside Potential

From a technical perspective, USD/JPY has stabilized above the 155.00 psychological level this week, with positive oscillators suggesting the pair may continue to rise. Key resistance levels are:

• Near-term target: 156.00 round figure (expected strong resistance)
• Secondary target: 156.50-156.60 zone, with a breakout pointing toward 157.00
• Further upside: around the high near 157.35

If a pullback occurs, the 154.50-154.45 zone will serve as a critical support. Below this, the decline may continue toward 154.00 and the 153.60-153.50 area.

Market Focus Moving Forward

The FOMC meeting minutes released Wednesday evening will be an important price catalyst, but the real focus is on Thursday’s US non-farm payrolls report. An unexpectedly strong data release should provide a clear directional push for USD/JPY.

It is also worth noting that divergence in global central bank policies remains prominent. The uncertainty surrounding the Bank of Japan contrasts with the Federal Reserve’s policy dilemmas, while emerging market currencies like the rupee against the dollar reflect fluctuations in global liquidity and risk sentiment. Against this broad background, the Yen’s multi-month lows reflect both internal policy gridlock and the complexity of the global macro landscape.