Ella 
In early Asian trading on Monday, USD/JPY consolidated its short-term gains and was below the mid-range of 146.00. USD/JPY USD/JPY was trading near Friday’s 146.62, its highest since November 2022. Monetary policy divergence between the Federal Reserve (Fed) and the Bank of Japan (BoJ) has boosted the dollar, but the possibility of the Bank of Japan’s intervention will prevent further gains in the greenback.
Bank of Japan Governor Kazuo Ueda told a Fed research seminar on Saturday that the central bank believes headline inflation remains below its target, which is why the BOJ will maintain its current ultra-loose monetary policy framework. According to Reuters, policymakers said domestic demand remained healthy and corporate fixed investment was supported by record high profits.
On the U.S. dollar side, central bank policymakers maintained hawkish comments to prevent the yen’s upside, providing support for the dollar/yen currency pair. At the Jackson Hole meeting, Federal Reserve Chairman Jerome Powell said the central bank is ready to raise interest rates further if necessary and that the next rate hike will be determined by data.
In addition to Powell’s speech, Philadelphia Fed President Patrick Harker said that he does not think it is necessary to raise interest rates at present, and that the Fed should keep interest rates stable and observe the impact of monetary policy on the economy. Meanwhile, Cleveland Fed President Loretta Mester said gross domestic product and labor market data showed the economy was gaining momentum. Mester emphasized that the current restrictive interest rate policy is not enough to achieve the inflation target, and a lower growth rate is crucial to moderate inflation. That said, the monetary policy divergence between the US and Japan is the main driver of yen weakness.
Next, market participants will be closely watching Japan’s unemployment rate and retail sales data due on Tuesday and Thursday, respectively. In addition, later in the week, the annualized flash US gross domestic product (GDP), core personal consumption expenditures (PCE) index and weekly jobless claims will be released. The focus will turn to Friday’s non-farm payrolls (NFP) data. These events are crucial in determining the direction of USD/JPY.
