Japan’s finance minister, Katayama, said an undervalued yen is generally a problem and that she and US Treasury Secretary Bessent agreed on a 25 September call to strengthen cooperation, with Japan to stay in close contact to keep currency markets orderly. USD/JPY closed just above 157.00 within Monday’s range. Japan’s last yen-buying round began on 30 July, when the currency was near its weakest in about four decades, and the Ministry of Finance (MoF) spent a record ¥15.4 trillion; the pair is now about six yen lower than where that action started.
The Bank of Japan (BoJ) raised its policy rate to 1.25% on 18 September, the highest in 31 years, while the Fed’s range stands at 3.75%–4.00%, a gap that supports borrowing in yen to buy higher-yielding US assets; closing it to the bottom of the Fed’s band would imply ten more quarter-point BoJ moves. Data due include August retail sales at 23:50 GMT on Tuesday, forecast at 3.3% YoY after 4%, MoF intervention figures for 27 August to 28 September on Wednesday, and the Tankan at 23:50 GMT with the large manufacturers’ index seen at 25 from 22; Tokyo CPI (ex fresh food) is forecast at 2.4% YoY from 1.8% at 23:30 GMT Thursday, alongside a 2.4% jobless rate. On charts, the 200-day EMA sits just under 158.00, resistance also sits near 159.00, support is 157.00 then 156.50 and just under 156.00; Stoch RSI is 73, with a daily close above 158.50 flagged as invalidation.
Trading Recommendations and Strategy
We recommend that derivative traders establish short positions on USD/JPY in the coming weeks, targeting a move down to 156.50 and eventually 156.00. Although the pair currently hovers near 157.00, Japan’s clear discomfort with an undervalued Yen means any rallies will face heavy resistance. We should look to sell on strength if short-term momentum pushes the pair toward the 200-day Exponential Moving Average near 158.00.
To support this bearish view, we point to Japan’s massive financial firepower, backed by over $1.2 trillion in foreign reserves as of late 2026. This easily allows Tokyo to repeat the massive ¥15.4 trillion intervention strategy we saw during the July weakness. If Wednesday’s Ministry of Finance data reveals actual Yen buying occurred in late September, it will confirm that Tokyo is actively defending this level.
Macroeconomic and Technical Backdrop
Furthermore, the macroeconomic landscape is shifting as the Bank of Japan’s rate sits at a 31-year high of 1.25% against the Fed’s 3.75% to 4.00% range. This narrower yield gap significantly reduces the profitability of the classic Yen carry trade, which historically dominated when the gap was over 5%. With Tokyo’s upcoming inflation data expected to jump to 2.4%, we anticipate growing market expectations for even more rate hikes.
From a technical perspective, the rising daily Stochastic RSI at 73 suggests we might see one last upward push before the drop. To protect our capital, we must set strict stop-losses, as a daily close above 158.50 would invalidate this short trade. Conversely, a clean break below 157.00 should accelerate the downward momentum toward the 156.00 floor.
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