USD/JPY trades near 158.60 as of mid-October 2026, supported by the Federal Reserve’s hawkish stance after the September 25-basis-point hike to a 3.75–4.00% target range and elevated Treasury yields, including 30-year bonds at multi-decade highs. The Bank of Japan’s September move to 1.25%—its highest since 1995—has narrowed the policy gap only gradually, with markets pricing limited further tightening before year-end amid a split vote and inflation data above target. Japanese authorities continue to signal intervention risk above the 160 area, reinforced by recent heavy purchases and statements from officials. Key near-term catalysts include the October 14 U.S. CPI release, the late-October FOMC decision, and the BoJ’s October 30 meeting, while longer-term forecasts from major banks point to modest yen appreciation by December 2026 driven by faster BoJ normalization and potential GPIF repatriation flows.