USD/JPY Forecast: Yen Defends 156.00 as BoJ Rate Hike Hopes Clash with Takaichi’s Dovish Rebound
Right now, USD/JPY is being pulled between expectations for a Bank of Japan rate hike and the government’s push to keep policy loose.
Quick overview
- USD/JPY is currently influenced by conflicting expectations of a Bank of Japan rate hike and the government's preference for loose monetary policy.
- BoJ Governor Kazuo Ueda is considering a March rate hike, while Prime Minister Takaichi's nominations aim to temper hawkishness on the board.
- The US Dollar faces challenges due to legal issues surrounding President Trump's economic plans and ongoing geopolitical tensions.
- Technically, USD/JPY remains in a bullish channel, with key support at 155.69 and a target of 157.58 if resistance at 156.80 is breached.
Right now, USD/JPY is being pulled between expectations for a Bank of Japan rate hike and the government’s push to keep policy loose. This tension is shaping the Yen’s direction. As of February 26, 2026, USD/JPY trades near 156.03, down from last week’s high of 156.82.
The pair faces both geopolitical and domestic pressures: BoJ Governor Kazuo Ueda is keeping a March rate hike as an option, while the government is nominating ‘reflationist’ board members to balance out the hawkish voices.
Is the current stability at 156.00 a brief pause before a surge to 157.50, or is the “Yen Carry Trade” about to face a structural unwinding?
The BoJ “Live” Window: Ueda Keeps March and April Open
In an interview with the Yomiuri Shimbun published today, BoJ Governor Kazuo Ueda said the central bank may act sooner than many expected.
- The April Target: Ueda reiterated that the BoJ will scrutinize incoming data, specifically the results of the upcoming spring wage negotiations, during its March and April policy meetings.
- No Wait for Tankan: Ueda repeated that the BoJ will closely watch new data, especially the results of the upcoming spring wage negotiations, during its March and April policy meetings.
- The 2% Goal: With inflation expected to reach the 2% target by the second half of fiscal 2026, the Governor’s focus on data is helping support the Yen.
The “Takaichi Brake”: Board Nominations Temper Hawkishness
While Ueda takes a more hawkish tone, Prime Minister Sanae Takaichi is pushing for a looser policy. Her government has nominated two well-known academics, Toichiro Asada and Ayano Sato, to the BoJ’s policy board.
- The Reflationist Pivot: Both nominees are seen as ‘reflationists,’ meaning they support looser monetary policy. The Takaichi administration is appointing them to help prevent the BoJ from raising rates too quickly, which could hurt domestic growth.
- Political Friction: Prime Minister Takaichi has said she is worried that high interest rates could slow the economy. This cautious approach is limiting Yen gains and keeping USD/JPY above 155.00.
US Dollar Softness: SOTU and the Geneva Wildcard
The US Dollar is having trouble recovering as President Trump’s economic plans face legal challenges.
- The Tariff Ruling: The Supreme Court recently ruled against using emergency powers (IEEPA) for broad tariffs, adding new uncertainty to US trade policy.
- State of the Union: In Tuesday’s State of the Union, the President defended his economic record but criticized the court’s ‘overreach.’ This has made traders question whether the planned 10% global import levy will hold.
- The Geneva Talks: The third round of US-Iran nuclear talks is happening now in Geneva. Both sides say there is ‘progress,’ but the US military buildup in the Middle East is making investors cautious, which is putting pressure on the Dollar.
Technical Analysis: Ascending Channel Points to 157.58
On the 2-hour chart, USD/JPY still looks positive from a technical perspective, even with some intraday pressure. The pair is following a clear upward channel that started at 153.10.
- The Support Floor: Buyers are strongly defending the 155.69 to 155.70 area. This zone was previously resistance but has now turned into a solid support level.
- Moving Averages: The 50-period MA ($155.16) is trending upward, providing dynamic support just below the current price action.
- The Resistance Target: If buyers push past the 156.80 resistance, the next target is 157.58, with the upper channel boundary near 158.35 after that.
Key Trading Levels to Watch
- Major Target:58. This is the main goal if the pair breaks above recent highs.
- Immediate Resistance: 156.80 — The level that capped this week’s rally.
- Critical Support: 155.69 — The “Must-Hold” level to maintain the bullish channel.
- Trend Invalidation: 154.90 — A break below this would signal a structural trend reversal.
The Analyst’s Verdict: Buy the Dips (For Now)
From my perspective as an analyst, the market is fundamentally conflicted but still looks bullish from a technical standpoint. Right now, Takaichi’s dovish approach is having more influence than Ueda’s hawkish stance, which is stopping the Yen from rallying further.
Trade Idea: Look for chances to buy on dips near 155.70. The target is still 157.58 as long as the pair stays in the upward channel. Set your stop loss below 154.90.
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