USD/JPY retreats as BoJ rate hike expectations outweigh political uncertainty

USD/JPY has completely erased its Monday gap higher, trading lower for the week as reports strengthen conviction about the Bank of Japan's commitment to raising interest rates. Despite initial market concerns over political stability following leadership changes, the yen has found support from growing expectations that the BoJ will proceed with monetary policy normalization. The pair's reversal reflects a shift in market sentiment, with traders now pricing in a more hawkish BoJ stance that could narrow the interest rate differential with the US. Technical analysis shows the pair has broken below key support levels, suggesting further downside momentum. The combination of BoJ tightening prospects and recent weak US employment data creates a challenging environment for USD/JPY bulls. Near-term support is seen at previous week's lows, while resistance has formed at the failed gap levels. Traders await upcoming US economic data for further directional cues.