USD/JPY Climbs Toward 147 as BoJ Hawkish Tone and Fed Rate Bets Diverge

The Yen continued to rise on Friday as expectations for the Bank of Japan (BoJ) to hike rates later this year grew. Despite Japan’s economy shrinking 0.2% in Q1 and 0.7% annually, the market is focused on the BoJ’s hawkish comments. The April policy summary showed policymakers are open to further tightening if external trade conditions improve.

Deputy Governor Shinichi Uchida reiterated this view, boosting hopes Japan may diverge from its ultra-loose monetary policy. Trade diplomacy also gave the Yen another boost. Japan’s lead trade negotiator Ryosei Akazawa is reportedly heading to Washington for the third round of US-Japan talks. Proposals include tariff rollbacks and liquidity support for Japanese exporters. Finance Minister Shunichi Kato will also meet with US Treasury Secretary Scott Bessent to discuss foreign exchange coordination.

US Dollar Under Pressure from Soft Data and Fed Bets

On the other hand, the US Dollar is under pressure after weaker-than-expected inflation and retail sales data. The April Producer Price Index (PPI) rose only 2.4% year-on-year – missing expectations and down from 2.7% in March. Core PPI slowed to 3.1%, further supporting the narrative of cooling inflation. Headline and core PPI both declined 0.5% and 0.4% respectively.

Retail sales painted a similar picture of slowing economy, with April up only 0.1%, a big drop from March’s 1.7% gain. With stable jobless claims and falling Treasury yields, the market is pricing in multiple Fed rate cuts in 2H2025. The resulting weakness in the dollar is making it hard for USD/JPY to get back above 145.00.

USD/JPY Technical Outlook: Channel Break in Sight?

USD/JPY is at ¥145.59, just below the 50-period EMA at ¥145.86. The pair has bounced off the channel support at ¥144.91, printing a higher low and now testing the top of the channel.

• A clean break above ¥145.86 could lead to §146.37 and §147.10.

• MACD is showing a possible bullish crossover, with histogram bars turning positive.* If they can’t get above the channel, sell toward ¥144.91 and ¥144.20.

For newbies, think of the channel as a sloping tunnel. A break above the top means new momentum. Without that, risk of a pullback. Place stops below recent lows.