The USD/JPY exchange rate surged on Wednesday after key comments from U.S. Treasury Secretary Scott Bessent sent markets re-pricing foreign exchange risk. Traders reacted strongly as Bessent reaffirmed a strong dollar policy and ruled out intervention to support the Japanese yen — triggering a renewed rally in the U.S. dollar and pushing USD/JPY higher.
As global markets now shift attention to the Federal Open Market Committee (FOMC) meeting, volatility is expected to remain elevated. This article breaks down the latest USD/JPY forecast, key drivers behind the recent yen drop, and what traders should watch next.
Why the Yen Slipped: Bessent’s Comments Impact FX Markets
Scott Bessent’s public remarks rejected any immediate U.S. currency market intervention to support the yen. By emphasizing that the U.S. pursues a strong dollar policy, he bolstered dollar strength against major currencies, including the Japanese yen.
That move came after recent speculation that the U.S. might intervene or coordinate with Japan to stabilize a weakening yen. Rejecting such action encouraged dollar buying and triggered a pullback in the yen, reinforcing USD/JPY upside near key technical levels.
FOMC on the Horizon: The Real Catalyst
While Bessent’s comments sparked the near-term move, the focus now shifts to the FOMC — where investors hope for clarity on U.S. monetary policy. Expectations of either rate cuts, a hold, or hawkish signals could materially influence the dollar’s trajectory.
Historically, USD/JPY is highly sensitive to Fed policy expectations:
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Anticipation of Fed rate cuts tends to weaken the dollar and boost the yen.
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Hawkish or neutral guidance supports dollar strength and keeps USD/JPY elevated.
With the FOMC decision looming, market positioning has tightened: traders are bracing for moves that could break the recent USD/JPY range and create fresh directional momentum.
Technical Outlook: Key Levels for USD/JPY Traders
Short-term:
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Bulls are watching to see if USD/JPY can hold above psychological resistance around 153–155.
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Failure to sustain gains may bring support zones near 147–148 back into play.
Medium-term:
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If the pair breaks above 155, technical targets stretch toward 157–158, where bearish pressure often re-emerges.
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On the downside, a drop below 146.50-147.00 could attract buyers and suggest deeper yen strength.
These levels are important for both swing traders and long-term investors, as they reflect key pivot points shaped by both macro fundamental news and technical trends.
Fundamental Drivers: More Than Just the Fed
Beyond central bank decisions, several other forces are shaping the USD/JPY forecast:
1. Bank of Japan (BoJ) Policy Expectations
The BoJ has recently held rates steady while reassessing inflation and growth. Despite marginally hawkish signals, the pace of policy tightening remains cautious — often reinforcing yen weaknesses when broader global flows favor risk assets.
2. Global Risk Sentiment
Safe-haven demand for the yen tends to rise during periods of uncertainty. Any geopolitical stress or equity market selloffs could temporarily strengthen the yen — even in a broader dollar rally.
3. US Economic Data
U.S. inflation, labor market strength, and consumer confidence data feed directly into Fed policy expectations. Strong data supports a resilient dollar, while softer data fuels speculation on rate cuts and boosts yen demand.
Expert USD/JPY Forecast: What Traders Should Expect
Bullish Scenario (Dollar Strength):
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FOMC holds or suggests prolonged policy restraint
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U.S. economic data beats expectations
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Rate differential favors U.S. yields
➡ USD/JPY could test 155–158.
Bearish Scenario (Yen Strength):
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FOMC signals potential rate cuts
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Strong Japanese macro surprises or intervention warnings
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Safe-haven flows accelerate
➡ USD/JPY may revisit 146 or lower support levels.
Conclusion: Strategic Takeaways for 2026 USD/JPY Forecast
The recent drop in the yen following Bessent’s remarks underscores how policy communication influences currency markets. But the broader trend will be shaped by what happens at the FOMC and how markets interpret risk appetite and central bank divergence.
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Stay tuned for updated price action after the FOMC release, as this event could be the next major driver for USD/JPY and global FX markets.
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