USD/JPY Falls as Strong Japan GDP and BOJ Tightening Hopes Boost Yen

Key Takeaways:

*Japan’s GDP beats expectations, fueling optimism over economic recover

*Rising inflation increases speculation of further BOJ tightening.

* BOJ may slow bond purchases as part of tightening strategy

Market Summary:

The Japanese yen strengthened against the U.S. dollar following the release of stronger-than-expected GDP data from Japan, which reinforced optimism over the country’s economic recovery. The robust economic performance, coupled with rising inflation, has increased market expectations that the Bank of Japan (BOJ) may tighten its monetary policy further in the coming months.

According to a former BOJ executive director, the central bank is likely to slow the pace of its government bond purchases next fiscal year—a move seen as another form of policy tightening. The BOJ has been reducing its bond buying by ¥400 billion per quarter since last summer, and whether it maintains or slows that pace in fiscal 2026 will be closely watched during the upcoming two-day policy meeting ending on June 17.

Although the BOJ is widely expected to keep its benchmark interest rate unchanged at 0.5% next week, further policy shifts—including tapering bond purchases—could support the yen in the medium term. Additionally, the timing of the next rate hike may depend on the impact of potential U.S. tariff policies under President Trump, which could influence global economic sentiment.

Technical Analysis 

USD/JPY, H4: 

USD/JPY is trading lower after retracing from a key downward trendline, and is now testing the support level at 144.25. 

The MACD shows diminishing bullish momentum and is on the verge of forming a death cross. The RSI has sharply pulled back from overbought territory and has confirmed a bearish crossover, signaling increased downside risk. 

A confirmed break below 144.25 could pave the way for further losses toward the next support at 142.65. However, if the pair manages to hold above the current level, short-term consolidation may occur.

Resistance levels: 145.70, 147.20

Support levels: 144.25, 142.65