Japanese Yen Weekly Forecast: USD/JPY Extends Losing Streak – Key BoJ, US Data Ahead

USD/JPY Extends Losing Streak to Three Weeks – Key Week Ahead

Here’s what traders need to know. The USD/JPY pair fell 0.51% to close at 155.156 for the week ending January 31. The USD/JPY pair briefly touched a high of 156.242 before sliding to a low of 153.708.

Expectations of a more hawkish Bank of Japan rate path contributed to the pullback in USD/JPY, though US tariffs helped prevent steeper losses.

Bank of Japan Summary of Opinions in Focus

On Monday, February 3, the Bank of Japan’s Summary of Opinions will give deeper insights into policymakers’ stance on the economic outlook, inflation, and monetary policy.

Concerns about Trump’s policy, global trade terms, and the potential impact on the Japanese economy could signal a more cautious BoJ policy stance. Under this scenario, the BoJ could delay further rate hikes, impacting Japanese Yen demand. Conversely, an optimistic outlook on the economy, wages, and inflation could boost Yen demand, potentially dragging the USD/JPY pair lower.

Uncertainty remains over whether the BoJ can raise rates again in H1 2025, heightening the USD/JPY pair’s sensitivity to forward guidance.

Research service firm East Asia Econ stated:

“Japan – still not the right inflation. Ideally, the BOJ wants the participation rate to peak, higher wages to make consumers more positive, and both demand-pull and supply-push to drive inflation. Instead, consumption is sluggish as rising goods price inflation outpaces wages, with the part rate continuing to rise.”

Wages and Services PMI Trends Crucial for the BoJ

On Wednesday, February 5, wage growth and Services PMI data will likely influence sentiment toward the BoJ rate path.

Economists forecast average cash earnings to rise 3.8% year-on-year in December, up from 3.0% in November. A sharp pickup in wages could fuel consumer spending and demand-driven inflation. A higher inflation outlook through consumption could raise bets on an H1 2025 BoJ rate hike.

Conversely, softer wage growth may signal a less hawkish BoJ policy stance, reducing expectations for a near-term rate hike. Under this scenario, the USD/JPY could move higher.

According to the preliminary survey, Japan’s Jibun Bank Services PMI increased to 52.7 in January, up from 50.9 in December. The services sector is a BoJ focal point, as policymakers require services to drive prices higher to support further rate hikes.

The preliminary report revealed stronger input and output prices and higher employment. Upward trends in prices and employment could bolster the case for an H1 2025 BoJ move.

Will Wage Growth Lead to Higher Household Spending?

On Friday, February 7, household spending figures will wrap up another crucial week for the BoJ. Economists expect household spending to fall 0.5% month-on-month in December, reversing a 0.4% rise in November.

Weak spending could test expectations of higher wages and rising consumer demand, dampening bets on a BoJ rate hike. Conversely, a further pickup in spending may fuel inflationary pressures, supporting a more hawkish BoJ policy stance.

Consumer confidence weakened in January, suggesting households may tighten their purse strings. Rising import costs and inflation continue to erode purchasing power, limiting the effect of higher wages on consumption.

Potential USD/JPY Moves

Economic data from Japan and sentiment toward the BoJ rate path will be key drivers of USD/JPY trends.

• Better-than-expected economic data and rising expectations of another rate hike in H1 2025 could strengthen the Yen, pushing USD/JPY lower toward 150.
• Weaker wage growth and household spending could signal a less hawkish BoJ rate path, potentially driving the pair toward 160.

US Services and Labor Market in Focus

Turning to the US economic calendar, services sector data and labor market reports will be crucial for the US dollar.

The US JOLTS Job Openings and ADP Employment Change numbers need consideration on February 4 and 5.

Economists expect job openings to fall from 8.098 million in November to 7.880 million in December. A larger-than-expected decline could signal a weaker labor market. However, economists forecast the ADP to report a 150k rise in employment in January, up from 122k in December. A sharp rise in employment could support wage growth and consumer spending.

The US Jobs Report on February 7 will be the main event. Economists predict nonfarm payrolls to rise 170k in January, down from 256k in December, and for wage growth to soften. A weaker jobs report may retrigger bets on an H1 2025 Fed rate cut. Conversely, another jump in nonfarm payrolls and steady wage growth could reinforce a more hawkish Fed policy stance, driving US dollar demand.

Traders should also consider services sector data since it accounts for around 80% of the US GDP. Economists expect the ISM Services PMI to rise from 54.1 in December to 54.3 in January. A marked rise in services sector activity, employment, and prices may signal a more hawkish Fed outlook.

FOMC members’ comments also need monitoring following the latest US tariffs. Concerns about tariffs driving inflationary pressures may suggest a potential delay to Fed rate cuts.

For USD/JPY trends, a more hawkish Fed rate path may drive the USD/JPY pair toward 160. Conversely, a more dovish Fed rate stance could support a fall toward 150.

Short-term Forecast:

USD/JPY trends will hinge on Japan’s economic data, the BoJ’s forward guidance, and US labor market data. Signals of higher inflationary pressures in Japan could support a more hawkish BoJ, weighing on the USD/JPY.

However, US tariffs, labor market data, and Fed chatter could complicate the USD/JPY’s trajectory. A more hawkish Fed may widen the US-Japan interest rate differential in favor of the US dollar.

Investors should monitor real-time data, central bank decisions, and expert commentary to adapt trading strategies effectively. For timely insights and updates on FX market trends, follow our real-time analysis here!

USD/JPY Price Action

Daily Chart

Despite last week’s decline, the USD/JPY sits above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY break above the 156.884 resistance level could enable the bulls to target 160 next. A return to 160 may support a move toward the 161.920 resistance level.

Conversely, a USD/JPY drop below the 50-day EMA could bring the 200-day EMA and the 149.358 support level into play.

The 14-day RSI at 47.05 suggests a USD/JPY drop to the 149.358 support level before entering oversold territory (RSI below 30).

Dive deeper into the trends. View our latest USD/JPY chart analysis for technical insights.