Japanese Yen Weakens vs. USD Ahead of NFP Despite BoJ Rate Hike Outlook

JPY Softens Further Against USD as US Jobs Data Takes Center Stage

The Japanese Yen (JPY) extended its recent decline for a second straight day on Friday, trading weaker against a rebounding US Dollar (USD). The USD/JPY pair continues to hover just below the 144.00 resistance level, awaiting a decisive breakout ahead of the high-impact US Nonfarm Payrolls (NFP) report due later today.

Domestic Weakness Weighs on the Yen

The downside in JPY has been fueled by disappointing Japanese economic data, particularly the latest Household Spending figures, which fell short of expectations. This adds to concerns over domestic demand and reduces immediate support for the Yen.

Trade Optimism Undermines JPY Safe-Haven Appeal

Market sentiment was lifted by renewed optimism over the resumption of US-China trade negotiations, which reduced demand for traditional safe-haven assets like the JPY. As risk appetite improves, capital tends to flow out of low-yielding currencies such as the Yen.

USD Gains, but Faces Resistance from Policy Divergence

The US Dollar is attracting strength from pre-NFP repositioning trades and rising Treasury yields. However, the upside in USD/JPY may be capped due to diverging monetary policy outlooks:

The Bank of Japan (BoJ) is increasingly expected to raise interest rates later in 2025.
In contrast, the Federal Reserve is anticipated to cut rates amid rising fiscal concerns in the US.

This policy gap could eventually shift the balance in favor of the JPY, especially if geopolitical uncertainties resurface.

Technical View: Bulls Eye Break Above 144.00

The USD/JPY pair is consolidating, with bulls awaiting a sustained move above the 144.00 mark to trigger new long positions. However, with resistance holding, traders should remain cautious of potential pullbacks, particularly if the NFP report misses expectations or signals labor market softening.