Japanese Yen edges lower vs USD amid Middle East jitters as Fed, BoJ meetings loom

The USD/JPY pair attracts some buyers at the start of a new week and climbs closer to the 154.00 mark during the Asian session, reversing a part of Friday's losses. Spot prices, however, remain confined in a range held over the past week or so and within striking distance of a nearly seven-month low, touched last Tuesday, as traders await this week's key central bank events.

The US Federal Reserve (Fed) and the Bank of Japan (BoJ) are heading into high-stakes policy meetings on September 15–16 and September 17–18, 2026, respectively. The latest US inflation figures, released last week, reaffirmed market bets that the Fed will raise borrowing costs on Wednesday. Adding to this, a further escalation of tensions between the US and Iran supports the safe-haven US Dollar (USD), which, in turn, is seen as acting as a tailwind for the USD/JPY pair.

In the latest developments, Yemen’s Iran-backed Houthi fighters said that they used drones and missiles to attack a military base in southern Saudi Arabia. Moreover, an Iranian cargo vessel was struck early Sunday in the Strait of Hormuz, while a planned regional meeting between Gulf states and Iran regarding the Strait of Hormuz has been postponed. This keeps the geopolitical risk premium in play, which turns out to be another factor benefiting the safe-haven buck.

That said, a more hawkish repricing of the BoJ's policy tightening path might continue to underpin the Japanese Yen (JPY) and cap the upside for the currency pair. In fact, traders have fully priced in a 25-basis-point (bps) rate hike later this week and are assigning a high probability of a follow-up move in December. Expectations gained traction after BoJ's Kazuyuki Masu said last week that underlying inflation is approaching 2% and the policy rate is still below the neutral rate.

USD/JPY daily chart

Technical Analysis

The USD/JPY pair maintains a bearish near-term bias beneath the 38.2% Fibonacci retracement level and the 155.30-155.20 horizontal support breakpoint. Only a firm recovery back above the said area would begin to ease the current bearish pressure.

On the downside, immediate support is now located at the 50% retracement at 152.00, ahead of the deeper 61.8% level at 149.17. A sustained break under 149.17 would expose the 78.60% retracement at 145.14.