USD/JPY pressured as Japan flash PMI hits six-month high, BoJ hike odds rise

The yen firmed against the dollar after Japan's August flash PMI data showed the fastest pace of private sector expansion since February, keeping USD/JPY capped in the mid-147s during early Asian trade. The composite reading was lifted by manufacturing, where output growth accelerated and factories returned to expansion territory, joining a still-resilient services sector. Crucially for policymakers, selling price inflation ran close to record highs while employment continued to rise, reinforcing the view that cost pass-through and wage momentum remain intact. That combination strengthens the case for the Bank of Japan to deliver a rate hike at its September meeting, with swaps markets already pricing a meaningful probability of a move. A hawkish BoJ narrative narrows the US-Japan yield differential that has underpinned USD/JPY, and also lends support to EUR/JPY and GBP/JPY downside. Technically, USD/JPY faces initial support near 146.80 and the 200-day moving average around 146.00, while resistance sits at 148.50 ahead of the 149.00 handle. Traders should watch Tokyo CPI and BoJ commentary for confirmation before extending yen longs.