USD/JPY Climbs as Markets Watch BoJ and Japanese Fiscal Policies

The USD/JPY pair climbed to 157.90 on Tuesday, with the yen trading in a tight range. Markets are closely monitoring the direction of Prime Minister Sanae Takaichi’s government, which continues its stimulative fiscal policies despite concerns over the weak yen and funding government spending.

In a recent speech to parliament, Takaichi promised to reduce the consumption tax on food while assuring markets that the government would avoid issuing additional bonds to finance its spending. This move has somewhat alleviated worries about rising public debt and yields.

This week, investors are focused on several key Japanese economic reports, including August wage data, current account figures, household spending, and September indicators for consumer confidence and machine tool orders.

The Bank of Japan (BoJ) is also in the spotlight after its September meeting summary revealed growing concerns that inflation could stay above the 2% target for an extended period. This keeps the possibility of another rate hike before the end of the year on the table, though the exact timing remains uncertain.

Technically, the USD/JPY pair shows a short-term upward trend but is consolidating within a narrowing range. On the H4 chart, the pair has settled above 157.54 and is trading around 157.86-157.96. The primary scenario suggests a rise towards resistance at 158.77, with a potential move to 159.36 if that level is breached.

On the H1 chart, the pair remains in consolidation around 157.96, with the Stochastic oscillator indicating buying momentum but also signaling potential overbought conditions. As long as the price stays above 157.80, the focus remains on a move towards 158.77, followed by a correction towards 157.96. A confirmed break above 158.77 would target 159.36 next.