USD/JPY Range-Bound as BoJ Policy Moves Remain Unlikely and Fed Rate Hike Outlook Softens

The USD/JPY currency pair remains confined within a narrow range amid limited expectations for immediate policy changes from the Bank of Japan. According to FX Street (Rabobank), markets anticipate no significant BoJ action at the October meeting, instead looking toward December for potential moves.

Meanwhile, the US Dollar shows signs of softness, with intervention concerns around the 160 level restraining any upside momentum. FX Street reports that the pair is trading defensively, holding between 157.55 and 158.45 intraday. United Overseas Bank forecasts a broader trading range of 156.35 to 158.70 over the next one to three weeks, with the possibility of further USD/JPY weakness over the coming one to three months.

On the Federal Reserve front, FX Street (TD Securities) notes that while the US economy and labor market remain resilient, they are not overheating. Market expectations for Fed rate hikes have shifted out to December 2026 and March 2027, suggesting that peak hawkishness has passed. This cautious Fed outlook adds to the subdued momentum in USD/JPY. For Japanese investors, the pair’s restrained movement reflects ongoing uncertainty amid divergent monetary policies and global economic conditions.