18.02.202613:00 Forex Analysis & Reviews: USD/JPY. Analysis and Forecast

Today, Wednesday, the USD/JPY pair is attracting new buyers and is confidently rising toward the 153.75 level. A combination of factors is keeping prices just below the weekly high, as market participants await the release of the FOMC meeting minutes.

The weak fourth-quarter GDP report for Japan, published earlier this week, has increased pressure on Prime Minister Takaichi to introduce additional stimulus measures following her decisive election victory.

Meanwhile, the International Monetary Fund (IMF) warned against cutting the consumption tax, noting that such a move would weaken Japan's fiscal resources and increase risks related to public debt.

In addition, expectations that Takaichi may oppose further monetary tightening by the Bank of Japan are undermining the yen's role as a safe-haven asset. At the same time, the generally positive risk sentiment—fueled by easing geopolitical tensions amid progress in U.S.–Iran nuclear talks—reduces demand for safe-haven currencies such as the Japanese yen. All of this, together with moderate strengthening of the U.S. dollar, is supporting USD/JPY bulls.

At the same time, investors hope that Takaichi will maintain fiscal discipline and that her policies will stimulate economic growth. Such a scenario could encourage the Bank of Japan to proceed with gradual policy normalization and help limit the yen's decline.

Moreover, the IMF recommended that Japan continue raising interest rates to keep inflation expectations properly anchored. In addition, the Reuters Tankan survey showed in February the first improvement in Japanese manufacturers' confidence in three months. Government data also recorded a 16.8% year-on-year increase in Japan's exports in January—the fastest growth since November 2022. This could cool bearish sentiment toward the yen and slow further gains in USD/JPY.

The U.S. dollar, however, risks losing the interest of major buyers amid expectations that the Federal Reserve has planned several rate cuts this year.

For better trading opportunities, it may be preferable to wait for the FOMC minutes, which, together with Friday's U.S. Personal Consumption Expenditures (PCE) index, will clarify the Fed's easing strategy. This, in turn, could provide fresh momentum to the U.S. dollar and drive the USD/JPY pair.

From a technical perspective, oscillators on the daily chart are negative, and the pair is trading below the 100-day and 20-day SMAs, indicating weakness among the bulls. A break above these moving averages would give bulls a chance to regain market control. For now, however, the bears hold the advantage.