Persistent US-Japan policy rate divergence continues to underpin USD/JPY strength, with the Federal Reserve’s September hike to the 3.75-4.00% range and expectations for further tightening contrasting the Bank of Japan’s more gradual path after its move to 1.25%. Recent Tokyo core inflation at 2.7% and mixed US payrolls data have reinforced bets on sustained differentials while keeping intervention risks elevated near the 160 level, where Japanese authorities have already acted in 2026. Traders are watching the BoJ’s late-October meeting and upcoming US inflation releases for signals on whether the gap narrows enough to cap upside or allow a test of higher thresholds before year-end.