USD/JPY Breaks 159.00 as Fed Hawkishness Diverges from BoJ Stance

The USD/JPY pair has staged a decisive technical breakout, clearing the 159.00 handle and opening the path for a potential rally toward 162.00. This momentum is fueled by rising expectations that the Federal Reserve will abandon its easing bias at the June FOMC meeting following recent hawkish comments from Governor Waller. Conversely, the Bank of Japan maintained interest rates at 0.75%, with Governor Ueda adopting a cautious tone regarding the timing of future hikes.

This monetary policy divergence is amplified by elevated oil prices stemming from tensions in the Strait of Hormuz, which keeps inflation risks tilted to the upside for the US. According to market data, Japan's annual inflation rate came in at 1.4% on May 21, 2026, missing the 1.8% forecast. This contrasts with robust US data, where the Manufacturing PMI reached 55.3 in the same period, exceeding expectations and reinforcing the narrative of American economic resilience compared to Japan's sluggish price growth.

USD/JPY remained positioned above the 159.00 level (close May 28, 2026), as traders eye the next psychological resistance levels. Looking ahead, market participants are focused on upcoming economic catalysts that could further define the pair's trajectory. Continued Yen weakness may also impact major Japanese financial and telecom entities, such as Mitsubishi UFJ (8306.T) and SoftBank Corp (9434.T), as the market adjusts to a prolonged period of high US interest rates.