USD/JPY Price Forecast: Bulls await move beyond 155.00 amid BoJ rate-hike doubts

The USD/JPY pair kicks off the new week on a positive note and holds steady above mid-154.00s, well within striking distance of the highest level since early February, through the first half of the European session. Data released earlier today showed that Japan's economy shrank for the first time in six quarters in the July-September period, which could further force the Bank of Japan (BoJ) to delay raising interest rates. This, in turn, is seen undermining the Japanese Yen (JPY), which, along with the emergence of some US Dollar (USD) buying, acts as a tailwind for the currency pair.

The Cabinet Office reported earlier today that Japan's economy contracted by 0.4% in the third quarter of 2025. Adding to this, the Gross Domestic Product fell 1.8% year-on-year in the September quarter following a 2.3% rise in the previous quarter. The readings were less worse than expected, though pointed to a limited strength in the Japanese economy. This comes as Japan's Prime Minister Sanae Takaichi’s administration is compiling a stimulus package to cushion the blow to households from rising living costs and dampens hopes that the BoJ will tighten its monetary policy soon.

Meanwhile, China and Japan exchanged sharp warnings after Takaichi’s remarks over the use of military force in case of any Taiwan conflict. In response, China threatened severe consequences, raising the risk of further escalation of tensions and the worsening diplomatic standoff between the two nations. This turns out to be another factor weighing on the JPY. The USD, on the other hand, draws support from reduced bets for another interest rate cut by the US Federal Reserve (Fed) in December and backs the case for a further near-term appreciating move for the USD/JPY pair.

However, the recent decline in the JPY prompted some verbal intervention from Japanese authorities, which holds back the JPY bears from placing aggressive bets. In fact, Japan's Finance Minister Satsuki Katayama said last week that she will be watching FX moves with a sense of urgency. Moreover, Japan's Economy Minister Minoru Kiuchi said on Friday that a weak JPY can push up CPI through import costs. Apart from this, a generally weaker tone around the equity markets benefits the JPY's safe-haven status and might contribute to capping the upside for the USD/JPY pair.

Furthermore, any meaningful USD appreciation seems elusive amid concerns about the weakening economic momentum on the back of the longest-ever US government shutdown, which keeps the door open for more easing by the Fed. Traders might also opt to move to the sidelines ahead of FOMC Minutes on Wednesday. Moreover, the delayed release of the US Nonfarm Payrolls (NFP) report for October and speeches from influential FOMC members could offer cues about the future rate-cut path. This, in turn, should provide some meaningful impetus to the USD and the USD/JPY pair.

USD/JPY 4-hour chart

Technical Outlook

The USD/JPY pair found decent support near the 100-period Simple Moving Average (SMA) on the 4-hour chart on Friday, and the subsequent move back above the 154.45-154.50 horizontal hurdle favors bullish traders. Given that oscillators on 4-hour/daily charts are holding in positive territory and are still away from being in the overbought zone; some follow-through strength beyond the 155.00 psychological mark will reaffirm the constructive outlook. Spot prices might then accelerate the positive momentum towards the 155.60-155.65 intermediate hurdle before aiming to reclaim the 156.00 round figure.

On the flip side, the 154.00 mark now seems to protect the immediate downside, and any further weakness might continue to attract some buyers near the 153.60-153.50 region, or the 100-period SMA on the 4-hour chart. A convincing break below, however, might prompt some technical selling and drag the USD/JPY pair to the 153.00 round figure. The downward trajectory could extend further towards the next relevant support near the 152.15-152.10 area.