The manufacturing sector contributes less than 20% to the Japanese economy. Nevertheless, an improving macroeconomic backdrop could increase consumer confidence and spending. The Bank of Japan is eyeing the recent wage hikes to fuel consumer spending and demand-driven inflation.

A pickup in inflationary pressures could allow the Bank of Japan to begin discussions about interest rate hikes.

In addition to the data, investors should pay attention to statements from the Bank of Japan and the Japanese government. Views from the BoJ on the effects of a weaker Yen on inflation, consumption, and monetary policy need consideration. After the retreat from 160, a USD/JPY move through the 158 handle could force the government to reissue an intervention threat.

US Economic Calendar: The ADP, JOLTs Job Openings, and the Fed

Later in the Wednesday session, US ADP nonfarm employment and JOLTs Job Openings will attract investor interest. A weaker labor market environment could slow wage growth and reduce disposable income. Consumers could respond by curbing spending on non-essential items, dampening demand-driven inflation.

A softer inflation outlook could raise investor bets on a September Fed rate cut.

While the economic indicators need consideration, the FOMC interest rate decision and press conference are the focal points. Recent US economic indicators, including inflation and employment costs, sank investor expectations of a September rate cut. A hawkish Fed Chair Powell press conference could further drive buyer demand for the USD/JPY.