The yen weakened as markets pared expectations of an October Bank of Japan (BoJ) rate rise after the September meeting summary was released at 23:50 GMT on Wednesday. USD/JPY moved back above 158.00 to a one-week high and was heading for a third straight weekly gain. Rate pricing for an October move has roughly halved since Monday, even as Tokyo core inflation data are due at 23:30 GMT with a 2.4% forecast, up from 1.8% and still above the BoJ’s 2% target.
The BoJ raised its policy rate to 1.25% on 18 September by a 7-2 vote and indicated further tightening if its outlook holds, with markets leaning towards a quarterly cadence that points to December. If so, attention turns to the Federal Reserve on 28 October, where futures imply odds of a hike near one in three. Tokyo’s core rate was last above 2% in December 2025, while Japan’s August wages were 4.7% YoY; US payrolls are due Friday at 12:30 GMT. In spot trading, resistance was flagged near 158.50 and 159.00, with support around 158.00 at the 50-day EMA and then 157.50; the daily Stoch RSI was near 82.
Trading Implications Of The Weakening Yen
As we enter October 2026, we see a clear opportunity in the weakening Japanese Yen as markets push back expectations for a Bank of Japan rate hike this month. With USD/JPY climbing past 158.00, derivative traders should consider leaning long on this pair in the near term. Recent shifts show that traders have cut October rate hike bets by nearly half, favoring a longer-term delay until December.
To back this outlook, we must look closely at the upcoming Tokyo core inflation data, which is expected to rise to 2.4% from the previous 1.8%. Historically, when Tokyo’s inflation spikes, it can revive rate-hike expectations, but the central bank’s recent cautious tone suggests they prefer to wait for wage growth data. If wage growth remains steady near the recent 4.7% year-on-year mark, the central bank will likely hold steady, keeping the Yen under pressure.
Risk Management And Technical Setups
We recommend managing risk by placing stop-losses just below the key support level of 157.50, as a daily close below 157.00 would invalidate this upward momentum. Our immediate upside targets sit at 158.50 and 159.00, which have historically acted as strong resistance barriers. While the daily Stoch RSI is currently stretched near 82, the macro divergence between a pausing Bank of Japan and a resilient US economy supports buying the dips on USD/JPY.
