USD/JPY falls as Japan PMI surge signals BOJ policy shift ahead

USD/JPY declined 0.8% to 155.20 as Japan's composite PMI jumped to a 17-month high of 52.6, driven by services sector strength at 53.4 and manufacturing's surprise return to expansion at 51.5. The manufacturing PMI exceeded forecasts of 50.2, marking the first growth in seven months and reinforcing expectations for Bank of Japan policy normalization. The services sector recorded its steepest expansion since mid-2025, reflecting robust domestic demand recovery. Technical indicators show USD/JPY breaking below the 155.50 support level, with next targets at 154.80 and the 200-day moving average at 154.20. The data strengthens the case for potential BOJ rate adjustments in coming meetings, particularly as inflation remains above target. Traders are positioning for further yen strength, with resistance now established at 155.80, while a sustained break below 154.80 could accelerate the pair's decline toward 153.50.