Title: USD/JPY Rises Amid Soaring U.S. Yields and Fed Policy Outlook
Author: Mitrade News (Original article credit)
Date: July 14, 2025
The USD/JPY currency pair saw significant movements in the global foreign exchange markets recently, driven by growing divergence in monetary policy between the United States and Japan. The dollar remains broadly supported thanks to stronger-than-expected U.S. economic data and a more hawkish Federal Reserve, while the Japanese yen continues to weaken amid ultra-loose monetary policy maintained by the Bank of Japan (BoJ). This article provides an in-depth overview of the economic and policy developments shaping recent price movements in the USD/JPY forex pair, offering insight into market sentiment and likely scenarios for traders.
Key Developments Behind USD/JPY Movement
1. Strength in the U.S. Dollar
The U.S. dollar has again found support from several interlinking macroeconomic factors:
– U.S. economic indicators such as non-farm payrolls, inflation, and retail sales have all surpassed expectations, suggesting continued resilience in economic activity
– Bond yields are rising, with the 10-year Treasury yield hitting new multiyear highs, reflecting increased expectations for higher-for-longer interest rates
– Market participants continue to price out any significant interest rate cuts from the Federal Reserve in 2025, contrary to dovish projections earlier in the year
– Investor sentiment supports the dollar as a safe-haven amid global geopolitical uncertainties and diverging economic performances globally
These factors collectively reinforce the dollar’s upward bias, particularly against currencies like the Japanese yen, where the central bank remains dovish.
2. Policy Divergence Between Fed and BoJ
A primary driver of the rise in USD/JPY is the widening gap between the monetary policies of the Fed and the BoJ.
– The Federal Reserve has maintained a firm stance regarding its commitment to controlling inflation, even as headline CPI shows signs of deceleration. Core components of inflation, particularly in the services sector, remain sticky, giving the Fed little reason to ease rates in the near term
– The BoJ, on the other hand, has maintained its negative interest rate stance and held steady on its yield curve control (YCC) strategy despite changing inflation dynamics. Japan’s inflation has been trending slightly above its 2 percent target, but wage growth and demand are not yet strong enough to warrant a hawkish transition
– As a result, U.S.-Japan interest rate differentials continue to expand, pushing investors to favor the dollar over the yen
3. Movement in USD/JPY Rates and Technical Levels
Over the past several sessions, USD/JPY has advanced sharply:
– The pair traded above ¥161.50, reaching fresh 34-year highs. This level surpasses the previous resistance zones established earlier in the year
– Technical analysts highlight that this breakout above resistance could signal further upside potential unless met by government intervention
– Key support lies at the ¥160.00 level now, with momentum staying bullish as long as the pair holds above this floor
Traders are actively watching for any signs of intervention from Japan’s Ministry of Finance (MoF), which has historically stepped in to support the yen during sharp declines.
4. Japanese Authorities Watching Markets Closely
The steep depreciation of the yen has not gone unnoticed by policymakers in Tokyo:
– Japan’s Vice Finance Minister for International Affairs, Masato Kanda, recently reiterated that the government is closely monitoring the foreign exchange market with a strong sense of urgency
– Kanda emphasized that authorities would take “appropriate action” against excessive volatility, signaling that the MoF is prepared to intervene if USD/JPY rises further toward the psychologically significant ¥165.00 level
– Market participants recall Tokyo’s previous intervention in 2022, when the government spent billions buying yen to support its value
– However, many traders remain
Read more on EUR/USD trading.