USD/JPY traded in the upper 153.00s this week and stayed within its weekly range, with resistance near 154.00. Markets awaited the release of minutes from the latest US Federal Reserve meeting.
The Fed kept its benchmark interest rate unchanged in the 3.5–3.75% range and signalled a steady policy stance in the near term. The minutes are expected to show differences within the committee after cooler US inflation and weak US jobs data last week.
Fed Minutes And Market Sensitivity
Chicago Fed President Austan Goolsbee said on Tuesday that, if price pressures keep easing, the Fed may cut rates several times this year. In Japan, weak Q4 GDP data released on Monday renewed concerns about the economic outlook and supported plans by Prime Minister Sanae Takaichi for large-scale stimulus and lower taxes.
The IMF warned of negative fiscal effects from cutting the consumption tax and called for further Bank of Japan tightening to keep inflation anchored. This reduced the yen’s upward momentum seen last week and supported the US dollar.
The Fed targets price stability and full employment, using interest rates to manage inflation around its 2% target. It holds eight policy meetings a year, and the FOMC includes 12 officials.
Quantitative easing increases credit by buying high-grade bonds and usually weakens the dollar, while quantitative tightening stops bond buying and is usually supportive for the dollar.
Range Bound Setup And Volatility Risk
With the USD/JPY pair stuck in a tight range below 154.00, the immediate focus should be on the upcoming Federal Reserve minutes. The lack of direction suggests building pressure, making options strategies like buying a straddle attractive to profit from a significant price move in either direction once the Fed’s internal debates are revealed. This is a classic volatility play for the coming days.
The arguments for US dollar weakness are growing, especially after looking back at the data from last month. We saw the January 2026 Consumer Price Index (CPI) come in at 2.9%, slightly below forecasts, while the jobs report showed a disappointing gain of only 155,000 positions. This backdrop supports the dovish stance of some Fed officials and suggests that futures markets may be underpricing the probability of interest rate cuts later this year.
In Japan, the situation is creating conflicting signals for the yen, which often leads to choppy trading. The confirmation that Japan’s economy contracted by 0.2% in the final quarter of 2025 makes government stimulus very likely, which is typically negative for the yen. However, this is running against persistent pressure from international bodies for the Bank of Japan to finally tighten its monetary policy and support the currency.
Looking forward, we could be at the beginning of a major policy divergence, the reverse of what we saw during 2024 and 2025. If the Fed continues to signal future rate cuts while the Bank of Japan is pushed toward tightening, the long-term trend for USD/JPY could shift significantly downward. Derivative traders should be positioning for this potential multi-month trend by watching for any hawkish shift in language from the Bank of Japan.
