BoJ and Prime Minister Takaichi’s Policies Add to Yen Weakness

Softer Japanese data and a weaker yen have intensified focus on Prime Minister Sanae Takaichi’s ultra-loose monetary policy stance and BoJ Governor Kazuo Ueda’s forward policy guidance.

October’s data came after the first meeting between Japanese Prime Minister Sanae Takaichi and BoJ Governor Kazuo Ueda on Tuesday, November 18. BoJ Governor Ueda kept a potential rate hike on the table, stating that monetary policy decisions will hinge on incoming data.

Wage growth trends will likely be crucial for the BoJ, given the weaker yen-import price dynamic. Updates from Japanese labor unions pushing for wage hikes ahead of the 2026 spring negotiations could support a more hawkish BoJ rate path.

Later in the morning session, Japan’s S&P Global Services PMI also requires consideration. Economists expect the Services PMI to drop from 53.1 in October to 52.8 in November. Slowing services activity would support a less hawkish BoJ rate path, given that the sector contributes around 70% to Japan’s GDP.

US Services PMI and Fed Speakers in Focus

While Japanese trade data faced market scrutiny, US services sector data will influence bets on a December Fed rate cut.

Economists expect the S&P Global Services PMI to fall from 54.8 in October to 54.6 in November. A modest drop in the headline PMI would signal economic resilience, given that the services sector accounts for around 80% of US GDP.

However, traders should consider service sector price trends, given the Fed’s increased concerns about inflation. As a key contributor to inflation, price trends will likely be the key driver for the US dollar. Elevated prices would support a more hawkish Fed policy stance, sending USD/JPY toward 160.

Beyond the data, FOMC members’ speeches may also move the dial. Growing support to delay further monetary policy easing to tame inflation would send USD/JPY higher. FOMC members John Williams, Michael Barr, Philip Jefferson, and Lorie Logan are on the calendar to speak. Views on inflation, the labor market, and the timeline for rate cuts will be crucial for the USD/JPY pair.

USD/JPY Scenarios: Diverging Monetary Policies

• Bearish USD/JPY Scenario: Hawkish BoJ rhetoric, intervention warnings, softer US Services PMI, and dovish Fed chatter could drag USD/JPY toward 155.
• Bullish USD/JPY Scenario: Dovish BoJ signals, stronger US PMI data, and hawkish Fed rhetoric could send USD/JPY toward 160.