Japanese Yen Holds Firm as BoJ Rate Hike Bets Counter USD/JPY Upside

JPY Outlook: Rate Hike Hopes Strengthen Yen as USD/JPY Stalls

Yen's Decline Appears Limited

The Japanese Yen (JPY) continues to weaken marginally against the US Dollar (USD) in early European trading on Thursday. However, the USD/JPY pair remains capped below the 143.00 level, signaling strong underlying support for the Yen.

📈 Forex Insight: View live USD/JPY price chart on Tredu Forex Charts.

BoJ Rate Hike Bets Offer Support

Market sentiment is increasingly confident that the Bank of Japan (BoJ) may continue hiking rates in response to stubborn domestic inflation, despite Japan’s real wages falling for a fourth straight month in April. These expectations contrast sharply with the global trend of easing, keeping JPY attractive—especially as a safe-haven asset amid geopolitical uncertainty.

🔍 Learn More: Explore how central bank policy impacts JPY performance in our BoJ Strategy Guide.

Fed Dovishness Weighs on USD

Wednesday's softer US data has strengthened dovish expectations for the Federal Reserve, with markets increasingly pricing in rate cuts in 2025. This caps USD strength and limits bullish potential for USD/JPY, despite short-term rallies.

Geopolitical Factors & Risk Sentiment

Investors are also cautious ahead of potential US-China diplomatic developments, including possible talks between Donald Trump and Xi Jinping, as well as the upcoming US Nonfarm Payrolls (NFP) report, both of which could add volatility to JPY pairs.

Key Takeaways

• USD/JPY remains capped as markets weigh diverging Fed and BoJ outlooks
• Safe-haven flows and rising BoJ tightening bets support JPY
• Watch for NFP data and US-China headlines for next directional move