28/10/25

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The USD/JPY currency pair experienced significant declines on Tuesday amid escalating concerns over potential Japanese government intervention and diverging monetary policy expectations between the Bank of Japan (BoJ) and the Federal Reserve (Fed). The pair’s decline was driven by a combination of local political signals and broader market sentiment, with traders cautious ahead of key central bank announcements.

Following an unsuccessful attempt to break above the 153.25-153.30 resistance zone — the monthly peak — the pair continued its downward trajectory into European trading hours. The Japanese Yen strengthened markedly in response to comments from Japan’s Economics Minister, Minoru Kiuchi, emphasizing the importance of stable foreign exchange rates that reflect economic fundamentals. This verbal intervention underscored the Japanese government’s intent to maintain FX stability amid market volatility.

Additionally, positive developments in diplomatic relations and economic cooperation helped temper the USD’s strength. A recent meeting between Japan’s Prime Minister Sanae Takaichi and U.S. President Donald Trump resulted in an agreement related to secure supply chains for critical minerals such as rare earths. The officials also reaffirmed their commitment to strengthening the alliance, supporting a weaker dollar environment and adding further pressure on the USD/JPY pair.

Market sentiment was also influenced by recent U.S. economic data, notably softer-than-expected consumer inflation figures. These data reinforced expectations of continued dovish policies from the Federal Reserve, which is widely anticipated to lower interest rates by 25 basis points at its upcoming policy meeting and possibly again in December. Conversely, inflation trends in Japan — particularly rising service-sector inflation — fueled speculation that the BoJ might consider tightening measures, although prospects for an imminent rate hike remain uncertain.

The upcoming BoJ policy meeting will be crucial in guiding the Yen’s next move. Given Japan’s pro-stimulus stance and extensive fiscal spending plans, a rate hike at this stage appears unlikely. Traders are thus cautious ahead of the central bank’s decisions, likely resulting in subdued market activity and limiting further downside.

Technically, the recent failure near the 153.25 level has formed a bearish double-top pattern, and a sustained move below 152.00 could open the door to further declines toward 151.50 or even 151.00. Conversely, a rebound above 152.20-152.25 could attract fresh selling interest and cap the pair around 152.90-153.00. A decisive move beyond the 153.25 zone could signal renewed momentum toward 154.00 and beyond, with potential targets moving into the mid-154s and the psychologically significant 155.00 level.