Fed-BOJ Policy Gap Remains Core Driver for USD/JPY

The persistent policy divergence between the Federal Reserve and the Bank of Japan remains the single most important macro theme shaping USD/JPY direction. With U.S. rates still elevated relative to Japan's ultra-accommodative stance, the yield gap continues to attract capital toward dollar-denominated assets.

This dynamic has been reinforced by broader market conditions this week, where strong corporate earnings momentum in U.S. tech and semiconductor names has kept U.S. assets attractive to global investors, indirectly supporting dollar demand against the yen.

Until the BOJ signals a more decisive shift away from its current policy framework, or the Fed pivots meaningfully on rates, USD/JPY is likely to remain anchored to this interest rate differential narrative, with any BOJ commentary on policy normalization acting as a key catalyst for volatility.