Japanese Yen Forecast: Will USD/JPY Drop Below 140? US Jobless Claims in Focus

Japan’s Producer Prices in Focus Amid Hawkish BoJ Commentary

On Thursday, September 12, Japan’s producer prices will spotlight the Bank of Japan rate path, possibly influencing the USD/JPY pair.

Economists forecast producer prices to increase by 2.8% year-on-year in August, down from 3.0% in July. Softer-than-expected figures could indicate weaker demand-driven inflation pressures, possibly reducing investor bets on a Q4 2024 BoJ rate cut. Falling expectations of a Q4 2024 rate cut could push the USD/JPY toward 143.0.

Bank of Japan Officials Support Higher Rates

On Wednesday, September 11, Bank of Japan Board Member Junko Nakagawa fueled Yen demand with hawkish comments, reportedly saying,

“Given real interest rates are currently very low, we will adjust the degree of monetary support, from the standpoint of sustainably and stably achieving our 2% inflation target, if our economic and price forecasts are met.”

Nakagawa remarks echoed those of BoJ Deputy Governor Ryozo Himino who recently supported a rate hike if the economy and prices aligned with projections.

On Thursday, Bank of Japan Board Member Naoki Tamura is also on the calendar to speak. Support for further rate hikes could fuel Yen demand.

Diverging Expert Views on BoJ Policy

This week, Unlimited Funds Chief Investment Officer Bob Elliot recently commented on the Bank of Japan’s policy goals, stating,

“Japan doesn’t have an inflation problem. There is still little urgency for the BoJ to do much based on macro conditions regardless of rhetoric, making the Fed the main driver of JPY for the foreseeable future, not the BoJ.”

US Economic Data to Drive USD/JPY Movement

Later in the session on Thursday, US labor market and inflation figures will require consideration.

US Jobless Claims

Economists forecast initial jobless claims will increase from 227k in the week ending August 31 to 230k in the week ending September 7.

Higher-than-expected claims could bolster investor bets on a 50-basis point September Fed rate cut, possibly pushing the USD/JPY toward 140. Moreover, an unexpected spike in claims, beyond 250k, could retrigger investor fears of a US recession.

Weaker labor market conditions may affect wage growth, possibly reducing disposable income and consumer spending. Downward trends in consumer spending may impact the US economy as it contributes over 60% to GDP.

The Fed could respond by cutting interest rates more aggressively in Q4 2024. A significant narrowing of the interest rate differential between the US and Japan could send the USD/JPY below 140.

US Producer Prices

Economists expect producer prices to drop from 2.2% year-on-year in July to 1.8% in August.

Weaker-than-expected figures may signal softer demand, possibly impacting the US economy and demand-driven inflation. Additionally, a weaker demand backdrop could raise expectations of a more dovish Fed rate path to support the economy. A more dovish Fed rate path could send the USD/JPY below 140 on speculation of a narrowing to the interest rate differential between the US and Japan.

Short-term Forecast: Bearish

USD/JPY trends will hinge on the inflation and jobless claims data from the US, coupled with BoJ forward guidance. A combination of hawkish BoJ comments and weaker US data could push the pair below 140.

Investors should remain alert with inflation, the US labor market, and central bank chatter likely to influence the BoJ and the Fed’s rate paths. Monitor real-time data, central bank insights, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY sat well below the 50-day and 200-day EMAs, affirming bearish price signals.

A USD/JPY return to 143.0 could give the bulls a run at the 143.495 resistance level. Furthermore, a breakout from the 143.495 resistance level may indicate a move toward the 145.891 resistance level.

Producer prices from Japan and the US, and US labor market data require consideration.

Conversely, a drop below the 141.032 support level the September 11 low of 140.706 could indicate a fall through 140.

The 14-day RSI at 35.10 indicates a USD/JPY drop below the 141.032 support level before entering oversold territory.