The USD/JPY currency pair is under extreme duress. Now, bearish sentiment has set in after repeated unsuccessful attempts to regain the 100-hour Simple Moving Average (SMA). The pair made a new impression as the pair recently broke below the very psychological level of 155.00. This is its first drop since April and the sharpest rate of decrease since January 2024. This recent turn down has set off alarm bells on Japan’s economic prospects, especially given the string of disappointing economic data and surging bond yields.
On Thursday, the USD/JPY currency pair hit a three-week low and has struggled to make a significant rebound since the drop. The Japanese Yen continues to soar on continued expectations for more tightening from the Bank of Japan (BoJ). Forecasters point out that a continued USD/JPY strength may trigger a short-covering move. This would permit the duo to retake the 156.00 level, but it faces upwards of a tough resistance at roughly the 155.40 area, which coincides with the 100-hour SMA.
Perhaps the most fundamental driver of the currency pair has been the recent spike in Japanese government bond yields. As of Thursday, the yield on the benchmark 10-year Japanese Government Bond (JGB) jumped to a rate not seen since 2007. This increase was sparked by a $247 billion new militarization plan pushed by the Japanese Prime Minister Sanae Takaichi. The recent jump in yields has reduced the rate differential between Japan and other JSTI members’ major economies. This decision has greatly increased Japan’s borrowing costs and fueled fears over the sustainability of Japan’s fiscal position.
In October 2025, Japan’s Household Spending decreased by 2.9% YoY, much lower than the market forecast of a 1.0% increase. This decline has further compounded fears about the country’s economic prospects, as consumer spending plays a crucial role in driving economic growth. The Japanese Yen’s ascent is being limited due to weak economic data. At the same time, surging bond yields are making a counter-pressure against the US Dollar.
With technical indicators on hourly charts in the red, there is room for the USD/JPY pair to depreciate further. Analysts are watching these signs intently, as they could indicate a continuing trend of bearish momentum. Market sentiment has darkened considerably, casting doubt on that rosier scenario. That’s quite a reversal since the recent breakdown underneath important help ranges.
Market participants across the spectrum are watching intently to gauge the significance of these changes. Specifically, they are zeroing in on the BoJ’s monetary policy pivot and its prospective impact on USDJPY. Amid expectations of yet more tightening on the way, the Japanese Yen could see further support making the USD/JPY outlook more challenging.