USD/JPY faces pressure as BoJ rate hike bets strengthen yen appeal

USD/JPY is experiencing downward pressure as speculation intensifies regarding a potential Bank of Japan rate hike, bolstering the yen's attractiveness against a fluctuating US dollar. Market participants are increasingly pricing in the possibility of BoJ policy normalization, marking a significant shift from years of ultra-loose monetary policy. The speculation comes amid signs of sustainable inflation in Japan and growing wage pressures, key conditions the BoJ has cited for policy adjustment. Meanwhile, the US dollar's performance remains mixed, caught between conflicting economic signals and Federal Reserve policy uncertainty. Technical indicators suggest USD/JPY may test key support levels if BoJ hawkish sentiment persists. The potential for Japanese policy tightening while other major central banks consider easing creates a compelling divergence trade. Traders should monitor upcoming BoJ communications closely for confirmation of policy shift timing.