Today’s Market Outlook 3 September 2026 USD/JPY Plunges to 156.20 Focus on Whether the Yen Carry Unwind Will Continue a

Today’s Market Outlook
3 September 2026

USD/JPY Plunges to 156.20
Focus on Whether the Yen Carry Unwind Will Continue and the Battle Around 156

■ Market Summary

Yen buying has strengthened rapidly in the FX market this week.

USD/JPY rose into the mid-160 range and set a new post-intervention recovery high. However, it then fell through 159, 158, and 157 in quick succession, declining to around 156.20 during the London morning session.

Remarks by Japan’s Vice Minister of Finance Mimura warning against yen weakness have provided fresh support for yen buying and accelerated the decline.

The triple pressure of higher oil prices, lower bond prices, and lower equities that weighed on markets through yesterday has eased somewhat. NY crude futures fell from the $92 range to briefly below $90, while the U.S. 10-year Treasury yield has paused its rise around 4.76%.

However, the unwinding of yen carry trades continues in USD/JPY. Even as oil prices and U.S. yields stabilize, upward pressure on the yen has not subsided.

■ Why the Yen Has Strengthened

The current yen appreciation reflects a combination of factors rather than a single catalyst.

・Intervention concerns above 160
・Vice Minister of Finance Mimura’s warnings against yen weakness
・U.S. Treasury Secretary Bessent’s calls for the Bank of Japan to raise rates
・Higher Japanese long-term yields
・Expectations of a narrowing U.S.-Japan interest-rate differential
・Expectations that the GPIF may raise its allocation to Japanese investments
・Risk aversion caused by falling equities
・The unwinding of yen carry trades

A particularly important development is that one-week USD/JPY implied volatility in the currency-options market has surged into the 10% range.

It had been below 6% on Tuesday, meaning volatility has risen sharply in a short period.

Yen carry trades, which involve selling the low-yielding yen to buy higher-yielding currencies, depend on stable market conditions. When volatility rises sharply, FX losses can exceed the income earned from interest-rate differentials, making speculative traders more likely to reduce short-yen positions.

The current yen appreciation appears to reflect not only expectations of Bank of Japan rate hikes, but also significant position adjustment caused by higher volatility.

■ USD/JPY

USD/JPY has declined by more than four yen in a short period, from the mid-160 range to around 156.20.

Market estimates suggest that, assuming a short-term U.S.-Japan interest-rate differential of around 2.5%, a move of roughly four yen would offset the expected return from a yen carry trade.

Using 160 as the starting point, the 156 area becomes one potential carry-trade breakeven level.

However, this is only a theoretical reference calculated from the interest-rate differential. It does not mean that 156 must become a firm market bottom.

On the upside, the first focus is whether USD/JPY can recover 157. If it remains unable to return to the 157 range, that would confirm persistent yen-buying pressure.

On the downside, 156.00 is a key threshold. A clear break below 156 could indicate that the move is extending beyond a simple carry-trade adjustment and that the yen-strengthening trend is gaining further momentum.

Given the sharp decline, short-term buying may emerge easily. However, as long as volatility remains elevated, even a rebound is unlikely to create conditions that favor rebuilding short-yen positions.

■ Conditions for Further Yen Strength

The following factors will be important in determining whether yen appreciation continues.

・Whether one-week USD/JPY volatility remains in the 10% range
・Whether USD/JPY breaks clearly below 156
・Whether Japanese long-term yields remain elevated
・Whether Bank of Japan officials signal a willingness to raise rates
・Whether Japanese authorities continue to warn against yen weakness
・Whether global equity-market declines intensify again
・Whether U.S. employment data causes U.S. yields to decline

Conversely, if equity markets stabilize and FX volatility declines, the carry-trade unwind is likely to pause.

If U.S. economic data is strong and long-term U.S. yields rise again, USD/JPY may also rebound from around 156.

■ Oil, Bonds, and Equities

NY crude futures have fallen from the $92 range to below $90, and the rise in oil prices has paused for now.

If lower oil prices continue, concerns over renewed inflation will ease, limiting higher U.S. yields and dollar buying. For Japan, lower import costs could also provide support for the yen.

On the other hand, if oil returns to the $92 range, inflation concerns and higher U.S. yields could re-emerge.

Although U.S. equities rebounded yesterday, Asian equities are weak today. Whether U.S. and European equities stabilize or global equity selling resumes is likely to influence the direction of yen carry trades.

■ U.S. Labor-Market Data and ISM Services

Ahead of tomorrow’s U.S. employment report, U.S. labor-market indicators and the ISM Services PMI will be closely watched today.

Key market forecasts are as follows.

・U.S. initial jobless claims: 205,000
・Previous: 203,000
・U.S. ISM Services PMI: 54.1
・Previous: 54.1

If jobless claims exceed forecasts and the ISM Services PMI is also weak, concerns about the U.S. labor market and economy could push U.S. yields lower and add pressure to USD/JPY.

Conversely, if employment and services-sector resilience are confirmed, this would validate Fed Chair Warsh’s hawkish stance and likely support higher U.S. yields and a rebound in USD/JPY.

The ISM employment index and prices paid index will be especially important for assessing tomorrow’s employment report and the inflation outlook.

■ Comments from Federal Reserve Officials

Remarks are scheduled today from Fed Governor Waller, Cleveland Fed President Hammack, Chicago Fed President Goolsbee, and others.

Markets will watch whether other Fed officials align with Fed Chair Warsh’s concerns about inflation and his stance toward further rate hikes.

A series of hawkish comments could support U.S. yields and the dollar. Conversely, if officials emphasize slowing labor-market conditions or downside risks to the economy, rate-hike expectations may ease and USD/JPY could decline further.

■ Key Events Today

・Whether USD/JPY can hold 156
・Whether one-week volatility remains in the 10% range
・Warnings against yen weakness from Japanese officials
・Whether NY crude futures recover $90
・Movement in the U.S. 10-year Treasury yield
・Whether U.S. and European equities stabilize
・U.S. initial jobless claims
・U.S. ISM Services PMI
・Remarks from Federal Reserve officials
・Position adjustment ahead of tomorrow’s U.S. employment report

■ Summary

USD/JPY has fallen sharply from the mid-160 range to around 156.20, reaching the area viewed as a carry-trade breakeven point.

The yen’s rise reflects intervention concerns, expectations of Bank of Japan rate hikes, higher Japanese yields, official warnings against yen weakness, and the carry-trade unwind caused by a sharp increase in FX volatility.

The central near-term question is whether USD/JPY can hold 156.

A clear break below 156 would strengthen expectations of continued yen appreciation. On the other hand, strong U.S. data and stabilization in equity markets and volatility could trigger a rebound following the sharp decline.

Markets will assess U.S. labor-market data and the ISM Services PMI while determining whether yen strength will extend further ahead of tomorrow’s U.S. employment report, or whether USD/JPY can stabilize around 156.