USD/JPY hits three-week high as Greenback rebounds, BoJ minutes in focus

The Japanese Yen (JPY) weakens sharply against the US Dollar (USD) on Wednesday, with USD/JPY advancing to its highest level since September 3. At the time of writing, the pair is trading near 148.78, up almost 0.80% on the day, as renewed Greenback strength pushed the pair higher despite the absence of major US economic data releases.

The Greenback’s recovery gathered traction after Tuesday’s cautious remarks from Federal Reserve (Fed) officials, particularly Chair Jerome Powell. He cautioned that “two-sided risks” surrounding inflation and the labor market “mean that there is no risk-free path” for monetary policy. Powell avoided committing to a clear timeline for additional rate cuts, reinforcing the Fed’s cautious stance ahead of upcoming meetings.

The Yen’s decline was further pressured by domestic data. The Jibun Bank flash Manufacturing Purchasing Managers Index (PMI) fell deeper into contraction territory in September, slipping to 48.4 from 49.7 in August and missing forecasts of 50.2. Meanwhile, the Services PMI held firm at 53, only a touch lower than 53.1 in August.

The focus now shifts to the Bank of Japan (BoJ) meeting minutes due on Thursday, which will offer a deeper look into last week’s monetary policy decision. The BoJ kept its benchmark rate unchanged at 0.50%. The vote was 7-2, with two board members dissenting and favoring a 25-basis-point (bps) hike.

Policymakers reiterated that the overnight call rate will continue to be guided around 0.50% and stressed that future adjustments will depend on the inflation and wage outlook. Governor Kazuo Ueda noted that “underlying inflation is still somewhat below 2%, but approaching that level,” adding that risks from US tariffs and the persistence of food price pressures need careful monitoring.

Looking ahead, market attention will turn to Thursday’s US economic releases, including Weekly Initial Jobless Claims, the second estimate of Q2 Gross Domestic Product (GDP), and Durable Goods Orders, before Friday’s core Personal Consumption Expenditures (PCE) Price Index. In Japan, Friday’s Tokyo Consumer Price Index (CPI) will also be closely watched for fresh signals on inflation and its implications for the BoJ’s policy path.