USD/JPY bounces up and approaches 159.00 with all eyes on the BoJ
|- USD/JPY tests weekly highs at 158.87 after bouncing from the 157.45 area.
- In Japan, the focus shifts to the BoJ's decision, with the Yen on the defensive.
- US GDP and PCE Inflation data are expected to support the view of a Fed pause later on Thursday.
The US Dollar is trading higher across the board on Thursday, favoured by the de-escalation of the EU-US tensions. A brighter market sentiment halted the “Sell America” trade, pushing the USD/JPY to test one-week highs, at 158.87 on Thursday, after bouncing from the mid-range of the 157.00s earlier this week.
The Yen remains on the defensive as the Bank of Japan’s (BoJ) two-day monetary policy meeting kicks off. The bank raised its benchmark interest rate by a quarter-point to 0.75% in December, the highest level in the last 30 years, and is widely expected to stand pat on Friday.
The BoJ meets with the Yen against the ropes
The Yen has been struggling after Japanese Prime Minister Sanae Takaichi called a snap election in early February, which might give her stronger parliamentary support to expand her big-spending, low-tax policy amid growing fears of a fiscal crisis. In this context, an ambiguous stance by BoJ Governor Ueda regarding further monetary tightening is likely to send the Yen on a tailspin.
The US Dollar, by contrast, is drawing some support from Trump’s softer tone towards Europe at the Davos World Economic Forum. The US President ruled out military action to annex Greenland and dropped the threat of additional tariffs on European countries, triggering a risk relief in financial markets.
The focus on Wednesday is on the release of the final numbers of the Q3 US Gross Domestic Product, which is expected to show a healthy economic growth, and the US PCE Price Index, which is seen steady at levels well above the US Federal Reserve’s 2% target. If the market consensus is confirmed, the data might provide additional support for the Greenback.
Economic Indicator
BoJ Interest Rate Decision
The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.
Read more.Next release: Fri Jan 23, 2026 03:00
Frequency: Irregular
Consensus: 0.75%
Previous: 0.75%
Source: Bank of Japan
confirmed
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.