BoJ Expected to Hold Rates Friday as Yen Retraces Half Its Recent Gains

BoJ Rate Decision Anticipated to Remain on Hold

As of the October 26, 2026 publication date, market participants widely expect the Bank of Japan (BoJ) to maintain its current policy stance at its upcoming Friday meeting. This follows the BoJ’s September rate increase, which was decided by a 7-2 vote, with the dissenters opposing the hike. BoJ Governor Ueda has indicated there is no pressing need for consecutive rate hikes, suggesting that a back-to-back increase on Friday is unlikely.

Economists surveyed by Bloomberg do not anticipate a rate hike in October, with most projecting the next move to occur in December. However, some board members, notably Takata and Tamura, may dissent in favor of a hike, which could potentially bring forward the timing of the next increase. The market will closely watch the BoJ’s October Consumer Price Index (CPI) and Japan’s September unemployment rate, both scheduled for release on Thursday at 23:30 GMT, as these are the final data points before the policy decision.

Yen’s Recent Price Action and Market Context

In the days leading up to the BoJ meeting, the Japanese Yen has retraced approximately half of its earlier gains against the US Dollar. On October 22 and 23, USD/JPY declined sharply, with the Yen strengthening through the 157.00 level to its lowest since September 18. However, on Monday, the Yen reversed some of these moves, rising from just above 156.50 to just above 157.50 and closing near the session high.

Technical indicators show that Monday’s high fell short of the 200-day and 50-day Exponential Moving Averages (EMA), both positioned just under 158.00. The October 22 drop marked the first daily close below 157.00 since September 18. Over the past six months, USD/JPY has traded within a range from just under 153.00 (September 8 low) to just under 164.00 (July high).

FXVNPro Market Perspective

The BoJ’s monetary policy decisions and forward guidance remain key drivers for the Yen, given the central bank’s influence on interest rates and currency valuation. The recent September hike marked a shift from the ultra-loose policy that had been in place since 2013. However, the BoJ’s cautious approach to consecutive hikes reflects ongoing considerations about economic growth and inflation dynamics.

Market participants will also consider the US Federal Reserve’s policy stance, with the Fed expected to hold its target range during its Wednesday meeting. US economic data, including third-quarter growth and the September Personal Consumption Expenditures Price Index (PCE), will influence expectations for future Fed moves. The interplay between US and Japanese interest rates, as well as risk sentiment, will continue to shape USD/JPY movements.

Trading Scenarios

• If the BoJ holds rates steady on Friday and signals a cautious outlook for December, then the Yen may consolidate near current levels, with USD/JPY potentially testing resistance near the 50-day and 200-day EMAs just under 158.00.
• If dissenting board members push for a rate hike on Friday, then this could bring forward expectations for December tightening, potentially strengthening the Yen and pushing USD/JPY below recent support levels around 157.00.

What Traders Should Watch

• Thursday’s release of Japan’s October CPI and September unemployment rate, which will provide insight into inflation and labor market conditions ahead of the BoJ meeting.
• Governor Ueda’s press conference on Friday morning (06:30 GMT), where guidance on December policy will be closely scrutinized.
• The US Federal Reserve’s Wednesday decision and subsequent US economic data releases, which will influence relative interest rate expectations and USD/JPY dynamics.
• Technical levels around the 50-day and 200-day EMAs near 158.00, which have acted as resistance in recent sessions.

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