Yen-to-Dollar Exchange Rate Retreats as Market Awaits US Jobs Report

The Japanese yen to USD exchange rate has extended its downward momentum for four consecutive sessions, slipping toward the lower boundary of its weekly trading range during Asian hours on Friday. Meanwhile, the greenback remains elevated near its highest level in a month, pushing the USD/JPY pair past the 157.00 threshold. This divergence persists despite fresh economic data from Japan showing improved household consumption figures for November, suggesting that currency market dynamics are driven by deeper structural concerns rather than recent data points alone.

Economic Tailwinds Insufficient to Support the Yen Against the Dollar

Japan’s Household Spending rebounded unexpectedly in November, registering a year-over-year increase of 2.9% after October’s contraction. However, this silver lining appears insufficient to combat the currency’s fundamental challenges. The same week, official statistics revealed that inflation-adjusted real wages—a critical measure of purchasing power—contracted for the eleventh consecutive month, declining 2.8% in November. This persistent erosion of real income creates a precarious situation where nominal consumption gains mask underlying economic fragility, deterring investors from backing the japanese yen.

The Bank of Japan faces a mounting dilemma: tightening monetary policy appears necessary on paper, yet wage-price dynamics suggest households cannot absorb further rate increases without facing genuine hardship. BoJ Governor Kazuo Ueda has signaled openness to continued policy normalization if economic forecasts materialize, but the timing remains uncertain. This hesitation contrasts sharply with market expectations that the Federal Reserve will adopt a more dovish stance, with rate cuts anticipated in March and beyond.

Geopolitical Friction Compounds Currency Weakness

Beyond domestic economics, Japan’s currency faces external pressure from escalating regional tensions. China has escalated its ongoing dispute with Japan by restricting exports of rare earths and rare-earth magnets, a move triggered by the Prime Minister’s recent Taiwan-related comments. Supply chain disruptions of this magnitude threaten Japanese manufacturers and amplify safe-haven demand for the US dollar rather than the yen, counterintuitively weakening the traditionally defensive currency.

USD Strength Anchored by Rate Cut Pricing

The US dollar continues to benefit from a two-week rally, maintaining support near one-month highs as markets prepare for this week’s Nonfarm Payrolls report. Though traders have priced in a scenario where the Federal Reserve cuts rates multiple times in 2026, including a potential March move, consensus remains cautious without further clarification on the Fed’s path. The employment data will provide crucial guidance, keeping the USD elevated and the yen-to-dollar exchange rate supported above recent resistance levels.

Technical Picture Maintains Bullish Bias for USD/JPY

On the 4-hour timeframe, the 100-period Simple Moving Average rests at 156.31, rising gently and serving as dynamic support for the pair. The USD/JPY pair trades above this level, while the MACD indicator sits comfortably above its signal line with an expanding histogram, confirming sustained upside momentum. The Relative Strength Index stands at 62, reflecting firm buying interest without reaching overbought extremes. As long as price remains above the 100 SMA, bulls retain control, and continued appreciation appears feasible if momentum accelerates. A retracement would first target the moving average support before any deeper pullback.