Japanese Yen weakens as GDP miss tempers BoJ rate hike bets; USD/JPY retakes 153.00

USD/JPY kicks off the new week on a positive note and snaps a five-day losing streak.
The weak Q4 GDP print from Japan tempers BoJ rate hike bets and weighs on the JPY.
Dovish Fed expectations keep the USD bulls on the defensive and might cap the pair.

Haresh Menghani FXStreet

The USD/JPY pair attracts some buyers during the Asian session on Monday and climbs back above the 153.00 mark following the disappointing release of Japan's Q4 GDP report. Spot prices, for now, appear to have snapped a five-day losing streak, reaching a two-week low last Thursday, although the upside potential still seems limited.

Data published by Japan’s Cabinet Office revealed that the economy grew 0.1% in the fourth quarter of 2025, compared to a 0.7% contraction recorded in the previous quarter. The reading, however, was below market expectations and tempered bets for an immediate interest rate hike by the Bank of Japan (BoJ). Apart from this, the underlying bullish sentiment exerts some downward pressure on the safe-haven Japanese Yen (JPY) and assists the USD/JPY pair to gain some positive traction at the start of a new week.

Meanwhile, the data is likely to give Japan's Prime Minister Sanae Takaichi impetus to announce more stimulus. Market players, however, remain hopeful that Takaichi could be fiscally responsible. and that her policies will boost the economy. This might prompt the BoJ to stick to its policy normalization path, which should act as a tailwind for the JPY. The US Dollar (USD), on the other hand, struggles to lure buyers amid dovish Federal Reserve (Fed) expectations, which might contribute to keeping a lid on the USD/JPY pair.

According to the CME Group's FedWatch Tool, traders ramped up their bets that the US central bank will lower borrowing costs in June after data released on Friday showed that consumer inflation rose less than expected in January. In fact, the headline US Consumer Price Index (CPI) rose 0.2%, while the core gauge increased 0.3% last month. This, to a larger extent, overshadowed last Wednesday's upbeat US Nonfarm Payrolls (NFP) report and keeps the USD bulls on the defensive, which, in turn, should cap the USD/JPY pair.

Economic Indicator

Gross Domestic Product (QoQ)

The Gross Domestic Product (GDP), released by Japan’s Cabinet Office on a quarterly basis, is a measure of the total value of all goods and services produced in Japan during a given period. The GDP is considered as the main measure of Japan’s economic activity. The QoQ reading compares economic activity in the reference quarter to the previous quarter. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

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