USD/JPY drops to 141.20 as yen gains safe-haven bid before Fed

USD/JPY declined 0.6% (85 pips) to 141.20 as the Japanese yen attracted safe-haven flows ahead of Wednesday's Federal Reserve policy decision. The pair extended losses from Friday's 142.50 high as markets increasingly price in a dovish Fed pivot with a 25 basis point rate cut fully expected. The yen's strength reflects both risk-off positioning and narrowing US-Japan yield differentials, with the 10-year spread compressing to 350 basis points from recent 380bp highs. Technical analysis shows USD/JPY broke below the key 142.00 support level, opening the path toward 140.50 (August low). The 200-day moving average at 141.80 now acts as immediate resistance. Bank of Japan officials' recent hawkish comments about potential rate normalization provide additional yen support. Traders watch for potential intervention risks if USD/JPY approaches 140.00, while Wednesday's Fed guidance could accelerate the dollar's decline against the yen.