The USD/JPY pair maintained its position around 155.40 during early Asian trading on Wednesday, entering a consolidation phase following a series of rebounds. Market participants are refraining from making significant directional bets as investors brace for interest rate decisions from both the Federal Reserve and the Bank of Japan this week.

The core tension currently driving the market centers on the prospect of further rate increases in the United States, while Japan simultaneously advances its monetary policy normalization efforts. The evolving interest rate differential between the dollar and the yen is poised to become the decisive factor shaping the currency pair's trajectory.

USD/JPY recovered from below the 153.00 handle to trade near 155.00, primarily propelled by dollar strength and rising U.S. Treasury yields. On the U.S. front, recent inflation data continues to reinforce expectations of tighter monetary policy. August's consumer price index and core inflation figures both demonstrated notable stickiness, and the recent surge in energy prices has intensified concerns about a resurgence in inflationary pressures. The 10-year U.S. Treasury yield briefly touched 5.041% on Tuesday, marking its highest level since 2007, before retreating to around the 5% threshold. This increase in yields has enhanced the relative attractiveness of dollar-denominated assets and has been a key factor underpinning the recent resurgence in dollar support.

Market consensus currently anticipates a 25-basis-point rate hike by the Federal Reserve on Wednesday, bringing the policy rate to a range of 3.75%–4.00%, a significant shift in the current policy cycle. Latest market pricing indicates approximately a 90%–95% probability of a quarter-point increase, suggesting that the rate decision itself has largely been priced into the dollar. The market's real attention will now shift to the policy statement, economic projections, and the tone of Federal Reserve Chair Powell's post-meeting press conference, with particular focus on whether the Fed signals room for additional rate hikes beyond this meeting.

For USD/JPY, a more hawkish-than-expected policy signal from the Fed could continue to support Treasury yields and the dollar, potentially pushing the pair to test higher levels. However, with rate hike expectations already heavily priced in, there is also a possibility of a "buy the rumor, sell the news" pullback in the dollar should the statement fail to further reinforce the tightening path. With the 10-year yield currently hovering near the 5% mark, whether yields can continue their upward trajectory will serve as a critical short-term variable for the currency pair.

Meanwhile, the Bank of Japan is scheduled to announce its September rate decision on Friday. Market expectations are widespread that the BOJ will raise its policy rate by 25 basis points from 1.00% to 1.25%, which would bring Japan's benchmark rate to its highest level since April 1995. Since this hike appears substantially priced into the market, the actual rate increase may not by itself sustainably drive yen appreciation. Investors will be more focused on Governor Kazuo Ueda's communications regarding the future pace of rate increases and the anticipated terminal rate level.

Expectations for BOJ policy tightening have notably intensified recently, linked to evolving wage and inflation pressures in Japan. Market participants are not only pricing in the September hike but are also evaluating whether the BOJ can sustain a relatively rapid pace of policy normalization. Should Ueda signal clear intentions for further tightening, the yen could attract fresh buying interest, potentially exerting downward pressure on USD/JPY. Conversely, if the BOJ emphasizes that future actions will remain data-dependent on economic and price developments, the pace of improvement in the yen's interest rate advantage may fall short of some market expectations.

Masafumi Yamamoto, chief FX strategist at Mizuho Securities, has previously noted that even with a rate hike this time, the BOJ's policy stance would find it difficult to be more hawkish than current market expectations, flagging the risk of USD/JPY rebounding toward the 157 level. Meanwhile, Standard Chartered Bank believes that the 25-basis-point hike in September is already substantially priced in, suggesting that without more hawkish policy guidance, the scope for further yen strength may be limited.

From a macro transmission perspective, USD/JPY is currently being pulled in opposite directions by two forces. On one side, rising oil prices in the U.S. are lifting inflation expectations, Treasury yields are climbing rapidly, and Fed rate hike expectations are strengthening—all factors that favor the dollar. On the other side, the imminent BOJ rate hike and persistent wage and price pressures in Japan are fueling expectations for further exit from accommodative policy, thereby providing support for the yen. The simultaneous presence of these forces makes rapid two-way fluctuations more likely for USD/JPY in the near term.

Additionally, high oil prices are not a straightforward negative or positive factor for the yen. Japan's high dependence on energy imports means that rising crude prices increase import costs and expand energy bills, potentially pressuring the yen in the short term. However, higher energy prices also push up domestic inflation in Japan, thereby strengthening the policy impetus for the BOJ to continue hiking rates. Therefore, the impact of oil price increases on USD/JPY depends on whether the market focuses more on deteriorating terms of trade for Japan or the heightened probability of further BOJ tightening.

The market is currently transitioning from the question of "whether the Fed will hike" to "whether the Fed will continue tightening after the hike" and "how much further the BOJ can go after its increase." This suggests that volatility in USD/JPY could expand notably over the next few trading days. Investors need to closely monitor the Fed's policy statement, Powell's remarks, Treasury yields, and the BOJ's policy guidance. If both central banks signal further tightening, carry trade positioning may undergo repeated adjustments; if the Fed adopts a hawkish stance while the BOJ remains relatively cautious, USD/JPY could regain upward momentum.

On the daily chart structure, USD/JPY previously rebounded after finding support in the 152–153 region, but the pair remains within a medium-term corrective structure. Price is trading below the middle Bollinger Band and the 100-day moving average, indicating that the broader trend has not yet shown a clear reversal. The daily RSI is around 40, reflecting relatively weak momentum, suggesting the current rebound is more of a corrective move. To the upside, the immediate focus is on the middle Bollinger Band near 157.15, with the 157.00–157.20 zone also serving as important resistance. A decisive break above this region could open the door toward the 100-day moving average near 159.60, followed by the upper Bollinger Band around 162.00. To the downside, support is located near 153.00 and 152.35; a break below 152.35 could reinforce the bearish daily structure.

On the 4-hour chart, USD/JPY has rebounded from recent lows near 153.00 and is currently trading above the 20-period moving average at 154.37, showing a clear improvement in short-term momentum. The RSI is approximately 62, indicating a temporarily strong zone. The 155.20–155.30 area represents the first resistance zone to overcome; if the pair can sustainably hold above 155.30, the next target could be the 4-hour 100-period moving average near 156.90. A further break could extend the rebound structure toward the 157.00 area. Conversely, if the pair continues to face resistance around the 155.00 handle and falls below the 154.70–154.40 zone, the short-term rebound structure would be compromised, potentially leading to a retest of support near the 153.00 level.

Given that the Fed and BOJ policy decisions are separated by only two days, the technical picture is highly susceptible to rapid adjustments driven by changing rate expectations. Key levels will need confirmation in conjunction with movements in Treasury yields and the dollar index.

In summary, USD/JPY is at a critical juncture where both central banks' policies are being repriced. U.S. inflation stickiness, rising oil prices, and Treasury yields breaking above 5% are reinforcing short-term dollar support, while the BOJ's imminent rate hike to 1.25% limits the upside potential for USD/JPY. The short-term market focus will shift from the magnitude of the Fed's rate increase to subsequent policy guidance, and then to the BOJ's pace of tightening. On the technical front, 155.30 is a key battleground for short-term bulls and bears, with resistance above near 157.00 and support below at 153.00 and 152.35. Ultimately, the decisive factors for the trend will be whether the U.S.-Japan interest rate differential continues to widen and whether the BOJ delivers clearer signals of sustained tightening.