- Japanese Yen remains on the back foot against a firmer USD for the fourth straight day.
- BoJ rate hike doubts and rising China-Japan tensions continue to undermine the JPY.
- The USD climbs to a one-month high and supports USD/JPY ahead of the US NFP report.
The Japanese Yen (JPY) slides to a nearly three-week trough against a broadly firmer US Dollar (USD) heading into the European session on Friday and seems vulnerable to slide further. Worries that consumption momentum could fade if inflation continues to outpace wage growth in early 2026 overshadow an unexpected rise in Japan’s Household Spending data for November. This, in turn, adds to the uncertainty over the timing of the next Bank of Japan (BoJ) interest rate hike and undermines the JPY amid an escalating China-Japan row.
Apart from this, concerns about Japan’s fiscal situation and a stable performance across equity markets further weigh on the safe-haven JPY. The USD, on the other hand, prolongs a two-week-old uptrend and touches a one-month top amid some repositioning ahead of the US Nonfarm Payrolls (NFP) report, providing an additional boost to the USD/JPY pair. However, bets for more rate cuts by the Federal Reserve (Fed), which marks a significant divergence in comparison to hawkish BoJ expectations, could offer support to the lower-yielding JPY.
Japanese Yen bears retain control amid rising China-Japan tensions, BoJ uncertainty
- The Statistics Bureau of Japan reported earlier this Friday that Household Spending rebounded following a sharp decline in October and unexpectedly rose 2.9% from a year earlier in November. The upbeat data, however, does little to provide any respite to the Japanese Yen amid persistent real wage weakness.
- In fact, government data showed on Thursday that Japan’s inflation-adjusted real wages fell for the 11th consecutive month, by 2.8% in November, suggesting that the underlying trend of inflation outpacing wage growth has not changed. This poses a challenge for the Bank of Japan and undermines the JPY.
- Furthermore, China escalated its dispute with Japan and has begun restricting exports of rare earths and rare-earth magnets to Japan. This ban follows the recent Taiwan-related remarks by Japan’s Prime Minister and heightens supply-chain risk for Japanese manufacturers, which further weighs on the JPY.
- BoJ Governor Kazuo Ueda left the door open for further policy tightening, reiterating earlier this week that the central bank would continue to raise interest rates if economic and price developments move in line with forecasts. This, along with rising geopolitical tensions, could lend support to the safe-haven JPY.
- The US Dollar, on the other hand, preserves its gains registered over the past two weeks and stands firm near a one-month top, providing an additional boost to the USD/JPY pair. The upside for the USD, however, seems limited amid dovish US Federal Reserve expectations and ahead of the US employment details.
- Traders have been pricing in the possibility that the US central bank will lower borrowing costs in March and deliver another interest rate cut by the end of this year. Traders, however, opt to wait for more cues about the Fed’s rate-cut path. Hence, the focus remains on the release of the US Nonfarm Payrolls report.
USD/JPY seems poised to climb further as break above weekly high comes into play
The 100-period Simple Moving Average (SMA) on the 4-hour chart is gently rising at 156.31, pointing to sustained upward bias. The USD/JPY pair holds above this gauge, with the average acting as immediate dynamic support. The Moving Average Convergence Divergence (MACD) line stands above the Signal line and back in positive territory, with a modestly expanding histogram that reinforces improving momentum. The Relative Strength Index (RSI) at 62 shows firm buying pressure without overbought conditions. If momentum persists, the pair could extend higher, while a pullback would bring the 100 SMA into focus.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.64% | 0.29% | 0.35% | 0.89% | -0.25% | 0.36% | 0.93% | |
| EUR | -0.64% | -0.35% | -0.24% | 0.24% | -0.90% | -0.28% | 0.29% | |
| GBP | -0.29% | 0.35% | 0.00% | 0.61% | -0.54% | 0.07% | 0.64% | |
| JPY | -0.35% | 0.24% | 0.00% | 0.53% | -0.62% | -0.02% | 0.60% | |
| CAD | -0.89% | -0.24% | -0.61% | -0.53% | -0.99% | -0.54% | 0.03% | |
| AUD | 0.25% | 0.90% | 0.54% | 0.62% | 0.99% | 0.61% | 1.18% | |
| NZD | -0.36% | 0.28% | -0.07% | 0.02% | 0.54% | -0.61% | 0.58% | |
| CHF | -0.93% | -0.29% | -0.64% | -0.60% | -0.03% | -1.18% | -0.58% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
