Chart of the Day – USD/JPY lowest since February – what stands behind the decline?

The yen continues its appreciation, which began on September 2. On a weekly basis, the Japanese currency has strengthened against the US dollar by over 3%. Figure 1: G10 Currency Performance (31.08.2026 – 07.09.2026)

Source: XTB Research, 07.09.2026

Shift in Fundamentals?

There are many indications that the move was not the result of direct market intervention, but was supported by hawkish repricing following a change in rhetoric from Bank of Japan officials. On September 2, during a speech to business leaders in Sapporo, Hajime Takata, one of the BoJ policymakers, described the current year as a “regime change year,” implying greater flexibility in responding to incoming data. He stated at the time that the bank should be more aggressive than the market expects, pointing to the need for dynamic interest rate hikes to quell gathering inflation pressure. Rate hike expectations were further fueled on the same day by Bank Governor Kazuo Ueda himself. As he highlighted: “we have concluded that within our monetary policy, we must pay greater attention than before to the risk of further inflation increases.” The next meeting is as soon as September 18 (next Friday). Investors have little doubt that it will bring an interest rate hike. What will be more important is whether another hike will follow before the end of the year (and whether there is a chance for another upward move as early as October). Figure 2: Market-Implied BoJ Interest Rate Path (2026 – 2027)

Source: XTB Research, 07.09.2026

Reserves Are Shrinking

A significant shift in the BoJ’s monetary policy is exactly what the markets have been waiting for. In previous months, we saw regular interventions from the Ministry of Finance and the Bank of Japan – however, they did not lead to a lasting stabilization of the exchange rate. This does not mean, of course, that they are not still a valuable tool in the arsenal of the MoF and BoJ. Foreign exchange reserves, although shrinking by a record $80 billion in August, remain at a very high level ($1.21 trillion), corresponding to nearly 20 months of imports. This is several times more than in most other developed economies.

Moment of Truth?

USDJPY pair will, of course, depend not only on developments in the Land of the Rising Sun. Market attention this Friday will turn to the August US CPI inflation reading, which could ultimately decide the FOMC’s decision at next week’s meeting. In this context, it is worth recalling the words of Christopher Waller, who stated last Thursday that the disinflation process is progressing, and core inflation looks even better than the main indicators suggest. He noted at the time that unless the upcoming CPI inflation reading presents a negative surprise, he will likely support keeping interest rates unchanged at the upcoming meeting. Figure 3: Change in Market-Implied Probability of a September Rate Hike in the US (2025 – 2026)

Source: XTB Research, 07.09.2026

Technical Analysis

Figure 4: USDJPY [D1] (08.08.2025 – 07.09.2026)

Source: xStation, 07.09.2026 As a result of the recent combined intervention and hawkish statements from BoJ officials, the rate fell significantly below all established moving averages (EMA 50, 100, 150). The pair broke below the previous low from the second half of April (around 155). The RSI indicator entered a deep oversold zone (25.8), which may suggest a slowdown in aggressive declines, increasing the probability of an upward correction in the coming days. However, MACD does not signal a trend reversal at this point.

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