USDJPY has recovered from a sharp decline from around 160 to the 155 area, where markets suspected Japanese yen support via intervention. The pair rebounded to about 158.9, indicating yen downside pressure has not fully vanished. Support for USDJPY remains relatively strong, driven by the U.S.-Japan interest rate differential and expectations that the Fed will keep a tighter policy stance for longer. A Reuters poll expects the BoJ to raise its policy rate to 1.0% in June as normalization continues. The yen’s medium-term strength depends on whether the BoJ signals continued hikes and narrows the yield gap decisively. U.S. CPI rose 0.6% month-on-month in April, with annual inflation at its strongest in three years, and PPI also reinforced expectations that the Fed will stay restrictive longer.
"USDJPY is recovering after a period of sharp volatility. Previously, the pair fell steeply from around 160 to the 155 area, as markets suspected that Japan had intervened to support the yen. However, in recent sessions, USDJPY has rebounded to around 158.9, suggesting that downward pressure on the yen has not completely disappeared."
"This indicates that although intervention risks from Japan remain present, the underlying support for USDJPY is still relatively strong, particularly from the U.S.-Japan interest rate differential and expectations that the Fed will maintain a tighter policy stance for longer. According to a Reuters poll published on May 15, 2026, nearly two-thirds of economists expect the BoJ to raise its policy rate to 1.0% in June, as the central bank continues the process of monetary policy normalization."
"The key issue lies in the pace of tightening. Markets are not only focused on whether the BoJ will raise interest rates, but also on whether it will be decisive enough to significantly narrow the yield gap with the U.S. A rate hike to 1.0% could support the yen in the short term, but if the BoJ continues to signal caution afterward, the impact on USDJPY may remain limited."
"On the other hand, the U.S. dollar continues to receive strong support from U.S. inflation data. U.S. CPI rose 0.6% month-on-month in April, while annual inflation recorded its strongest increase in three years. This has raised concerns that price pressures in the U.S. remain persistent, especially as energy costs contributed significantly to the increase in inflation. In addition to CPI, PPI data also reinforced the view that the Fed may find it difficult to shift toward easing soon."
Read at London Business News | Londonlovesbusiness.com
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