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The USD/JPY pair is moving confidently toward the 200-day EMA, having broken the round 157.00 level during the European session — after the Bank of Japan's press conference.
The initial positive market reaction to the unexpectedly "dovish" policy decision has gradually faded after Governor Kazuo Ueda confirmed an intention to continue raising rates depending on economic and inflation dynamics. Notably, today's rate increase was not unanimous: two board members dissented, calling for a more cautious approach to tightening borrowing costs. That split added pressure on the yen and highlighted discord in monetary policy deliberations.
ING analysts report that the Bank of Japan raised its policy rate by 25 basis points to 1.25%. Board members Toichiro Asada and Ayano Sato voted against the increase. Economists note that Japan's core consumer-price index stayed above 2% through 2025 and that inflation is expected to remain above the target in the coming years. Thus the decision signals recognition of persistent inflationary risks.
ING also highlights internal divisions within the central bank's leadership: the two dissenters, appointed by Prime Minister Sanae Takaichi, argued a rate hike at this meeting was unwarranted without additional inflation impulses. That stance could complicate internal consensus on future policy moves.
Published data also show that Japan's national CPI was flat in August and that annual core inflation was below the BOJ's 2% target. That weakens expectations of a sharper tightening cycle, adding pressure on the yen and giving USD/JPY room to rise.
At the same time, the US dollar attracts buyer interest on the back of the Federal Reserve's hawkish projections. At its recent meeting, the Fed raised rates for the first time in more than three years and projected the possibility of further hikes before year-end.
Additionally, higher energy prices continue to create inflationary risks, which strengthens expectations of further Fed tightening. Combined with rising geopolitical tensions globally, this increases the geopolitical risk premium and reinforces the dollar's status as a safe-haven asset, supporting USD/JPY upside.
Technically, after the break of 157.00 — just below which runs the 20-day SMA — the short-term outlook for USD/JPY looks bullish. The pair met resistance at the 200-day EMA; further resistance is expected at 158.00 and at the 200-day SMA around 158.50.
On the downside, nearest support is seen at 156.60, then the round 156.00 level. A break below that level would lead to deeper losses. Oscillators are mixed, while the RSI is moving toward the positive zone, indicating strengthening bullish momentum.
The table below shows this week's percentage moves of the Japanese yen versus major currencies. The yen strengthened most versus the New Zealand dollar.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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