Japanese Yen Forecast: USD/JPY Rebounds Amid Policy Uncertainty
Published: February 25, 2026
Key Highlights
- USD/JPY rebounds to 156.279 as market sentiment shifts.
- Fading expectations of an April Bank of Japan (BoJ) rate hike weaken the yen.
- US economic data and hawkish FOMC minutes support the US dollar.
- Medium-term outlook for USD/JPY remains bearish despite short-term bullish signals.
Market Dynamics
The USD/JPY currency pair saw a rebound, reaching 156.279, influenced by Prime Minister Sanae Takaichi's comments regarding interest rates. Takaichi's advocacy for loose monetary policies has led to a sell-off in the yen, particularly as market expectations for an April BoJ rate hike diminished.
Impact of Economic Data
Recent US economic data has cooled expectations for a June Federal Reserve rate cut, which has bolstered the US dollar. The probability of a June cut has decreased from 63.4% to 49.6%, supporting a cautiously bullish outlook for USD/JPY.
Technical Analysis
On the daily chart, USD/JPY is trading above its 50-day and 200-day Exponential Moving Averages (EMAs), indicating a bullish bias. However, the medium-term outlook remains bearish due to expectations of a BoJ rate hike and potential Fed rate cuts.
Key technical levels to watch include:
- A break below the 50-day EMA could target 153.
- A sustained fall through the 200-day EMA may lead to a drop towards the 150 support level.
Political and Economic Influences
The recent US Supreme Court ruling regarding tariffs has added complexity to the BoJ's monetary policy considerations. Takaichi's stance and the uncertainty surrounding US tariffs suggest that the BoJ may maintain its current policy until summer.
Market participants are also closely watching President Trump's upcoming State of the Union Speech, which may influence USD/JPY trends based on his comments regarding tariffs.
Conclusion
The outlook for USD/JPY is shaped by the BoJ's policy direction, US economic indicators, and geopolitical developments. While short-term trends may show bullish signals, the medium-term perspective remains bearish, with potential for the yen to strengthen if the BoJ moves towards rate normalization and the Fed implements rate cuts.
For further insights and trading setups, traders are encouraged to monitor economic calendars and market news closely.