USD/JPY advances as upbeat NFP lifts US Dollar

The Japanese Yen (JPY) weakens against the US Dollar (USD) on Thursday, as stronger-than-expected US Nonfarm Payrolls (NFP) data lifts the Greenback and reinforces policy divergence between the Federal Reserve (Fed) and the Bank of Japan (BoJ).

The USD/JPY surged sharply during the early American session following the release of the strong US Nonfarm Payrolls report, which reignited demand for the US Dollar. The pair is currently trading around 145.00, up nearly 1% on the day, after drifting in a narrow range through most of the Asian and European sessions.

The latest US Nonfarm Payrolls (NFP) report came in stronger than expected, with the economy adding 147,000 jobs in June, beating forecasts of 110,000 and slightly above the 144,000 jobs added in May. The Unemployment Rate edged down to 4.1% in June 2025 from 4.2% in May, defying market expectations of a rise to 4.3%.

Initial Jobless Claims also came in better than expected, falling by 4,000 to 233,000 in the week ending June 28. However, Average Hourly Earnings came in weaker than anticipated, signaling some easing in wage pressures despite the strong jobs numbers.

The stronger employment figures reinforced the narrative of economic resilience in the US, leading markets to dial back expectations for a near-term Fed rate cut. Treasury yields moved higher in response, boosting the US Dollar and driving fresh upside in USD/JPY as traders reassessed the path of US monetary policy.

Meanwhile, comments from Bank of Japan (BoJ) board member Hajime Takata offered a cautiously hawkish tone but failed to shift near-term sentiment in favor of the Yen. Speaking on Thursday, he emphasized the need to resume interest rate hikes following a temporary pause, stating that the central bank is currently in a “wait and see” phase to assess the broader impact of U.S. trade measures on Japan’s economy. “My view is that the BoJ is currently only pausing its policy interest rate hike cycle,” he said, suggesting that the ultra-loose stance should eventually be phased out.

Takata said Japan is “close to achieving” the BoJ’s 2% inflation target, aided by robust corporate earnings, a tightening labor market, and solid wage growth. While he acknowledged that high uncertainties remain—particularly regarding U.S. trade policy and President Trump’s sweeping tariffs announced on April 1—he maintained that the central bank should resume rate hikes after a short “wait and see” period to assess the broader economic impact.

Looking ahead, attention shifts to the Institute for Supply Management (ISM) Services Purchasing Managers' Index (PMI) report, scheduled for release later on Thursday. Markets anticipate a slight improvement in service sector activity, with forecasts indicating a reading of around 50.5. A stronger-than-expected print could reinforce confidence in the US economic outlook and further support the US Dollar, especially after the upbeat Nonfarm Payrolls data. On the other hand, a weaker reading may raise concerns about slowing momentum in the services sector and could trigger a mild pullback in USD/JPY.