USD/JPY in January: A Detailed Look at Market Movements Trust Company Trust Company
6 min readJan 26, 2024


The USD/JPY rate has experienced a dynamic start to 2024, shaped by shifting economic indicators and monetary policies in the U.S. and Japan. This article delves into the factors influencing these fluctuations, including policy decisions and key economic reports impacting investor sentiment. We’ll explore the reasons behind the recent rise and fall of the pair and provide insights into the potential future trajectory of USD/JPY in the coming months.

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Recent Changes in the USD/JPY

USD to JPY exchange rate (30 days) / TradingView

Towards the end of last year, USD/JPY was on a downtrend as the pair declined due to economic and policy changes. However, when the New Year began, the trend reversed, and buyers took over, pushing the price back toward the 152.00 peak.

Factors Driving the Increase

The most recent rise in the pair came at the start of 2024 as investors scaled back bets on Fed rate cuts. At the same time, the yen weakened as markets gradually lost hope that the BoJ would pivot to a more hawkish stance.

The dollar started the year on the front foot as sentiment shifted in the markets. The US reported several positive economic reports that had investors rethinking the timing of the first Fed rate cut. Bets for a March rate cut fell, and there was now focus on May for the first rate cut. At the same time, the messaging from Fed policymakers changed from dovish to hawkish. Most policymakers started pushing back on rate cut expectations, stating that inflation was still a concern. As a result, the demand for the dollar went up, pushing USD/JPY higher.

On the other hand, the yen was weakening as the dollar rose, further boosting USD/JPY. The yen weakened as hopes for a more hawkish outlook for the BoJ diminished. An earthquake in central Japan led some analysts to cut bets on a looming shift to rate hikes in Japan. This darkened the outlook for Japan’s economy.

Reasons for the Recent Decline

The most recent drop in the USD/JPY pair came after the BoJ’s January policy meeting. Although the central bank decided to keep negative rates, they hinted that the conditions for a shift out of negative rates were aligning. These include inflation and wage growth, which has stayed above the 2% target. The BoJ is keen to see that wages in the country are rising. This would finally allow for rate hikes. This message renewed hopes for a more hawkish stance for the BoJ, strengthening the yen against the dollar.

Policy and Economic Shifts in the U.S. and Japan

The recent changes in the USD/JPY exchange rate have come due to policy and economic changes in the US and Japan.

The U.S.

There haven’t been any policy changes in the U.S. since the early December Fed meeting. However, expectations for future policy decisions have shifted. Whereas earlier investors expected the first Fed rate cut in March, now bets have risen for the first cut in May. At the same time, policymakers are sounding more hawkish, with some pointing at June for the first rate cut.

Meanwhile, on the economic front, the U.S. has released major economic reports, including employment, inflation, and retail sales.

The most recent nonfarm payroll report revealed a surprise increase in US employment, pointing to a robust labor market. Additionally, the unemployment rate was 3.7% when analysts expected it to climb to 3.8%. This clearly showed that the U.S. economy was thriving despite high interest rates.

Next came the inflation report, which also beat forecasts, coming in higher than expected. It came in at 0.3% from 0.1% the previous month in December. On an annual basis, inflation was 3.4% from 3.1% the previous month.

Finally, the U.S. released another upbeat report on retail sales, supporting the robust US economy.


Japan released inflation data showing the National core CPI dropped to 2.3% in December from 2.5% the previous month. However, it remained above the BoJ’s 2% target. This report solidified expectations that the central bank will not hurry to end its ultra-easy monetary policy.

On policy, the Bank of Japan just ended its most recent policy meeting, keeping rates unchanged. However, policymakers were more optimistic about a looming shift to rate hikes if inflation and wages continue rising.

Outlook for the Coming Months

2024 started positively for USD/JPY as the outlook for monetary policy in Japan and the U.S. changed. At the same time, economic indicators supported this shift. Therefore, the dollar will keep rising if the U.S. economy continues showing resilience despite high interest rates. Moreover, investors eagerly await the January 31st Fed meeting, which will shape the outlook for rate cuts in the US. This will also influence the outlook for the pair.

Meanwhile, the yen will remain vulnerable if the BoJ continues holding off on a policy shift. With this in mind, it is clear that the pair has more upside potential. However, this outlook might change if the Fed sounds more dovish than expected at its next policy meeting. Moreover, there is a chance that the BoJ will start getting defensive of the yen and try to stop excessive declines. This would mean verbal warnings and threats of intervention.

Technical Analysis: USD/JPY’s Position Near Mid-147.00

On the technical side, it is clear that the bias is bullish because the price sits above the 22-SMA while the RSI is in bullish territory above 50. The trend recently changed when the price broke above the SMA. However, the rally paused at the 148.02 resistance level, where price action showed indecision. This might lead to a pullback to retest the 22-SMA as support. The price could also dip lower to the 144.00 support.

On the other hand, if bullish momentum is strong enough, the price might break above 148.02 without pulling back. If this happens, it will allow USD/JPY to return to the 152.00 key resistance level. At this point, bulls might find it difficult to push prices higher because the level has led to a reversal before.

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