Today’s Market Outlook 4 September 2026 Yen Appreciation Pressure Driven by Diverging U.S. and Japanese Monetary Policy
Today’s Market Outlook
4 September 2026
Yen Appreciation Pressure Driven by Diverging U.S. and Japanese Monetary Policy
Today’s U.S. Employment Report Will Set the Next Direction for USD/JPY
■ Market Summary
The yen has strengthened this week in the FX market.
USD/JPY fell sharply from the mid-160 range, extending its decline to around 155.30 in yesterday’s New York session. Yen buying has paused somewhat today, allowing the pair to rebound to around 156.58 during the London morning session. It is currently trading near 156.40.
The background to yen strength is a change in the outlook for U.S. and Japanese monetary policy.
For the Bank of Japan, expectations of a September rate hike and further tightening before year-end have strengthened following U.S. Treasury Secretary Bessent’s calls for monetary normalization and Bank of Japan Policy Board member Takata’s constructive stance toward rate hikes.
Meanwhile, Fed Governor Waller said that he would support keeping rates unchanged if the disinflation trend continues. As a result, expectations of U.S. rate hikes that increased after Fed Chair Warsh’s speech last weekend have receded.
The key focus today is whether the U.S. employment report will maintain this divergence in U.S. and Japanese monetary-policy outlooks or revive expectations of U.S. rate hikes.
■ Diverging U.S. and Japanese Monetary Policy Outlooks
The market is now increasingly viewing the Bank of Japan as moving toward rate hikes, while expectations for the next FOMC are nearly evenly split between holding rates steady and raising them.
CME FedWatch currently shows the following probabilities for the next FOMC meeting.
・No change: 49.6%
・25-basis-point rate hike: 50.4%
Compared with immediately after Fed Chair Warsh’s hawkish remarks, conviction in another rate hike has declined substantially.
However, Governor Waller did not offer unconditional support for holding rates steady. He also said that this month’s decision will depend on the August inflation data due next week.
Even if today’s employment report is weak, rate-hike expectations may strengthen again if next week’s U.S. CPI is high. Therefore, today’s result alone will not fully determine the direction of U.S. monetary policy.
■ U.S. Employment Report
The U.S. August employment report will be released at 12:30 London time.
Market forecasts are as follows.
・Nonfarm payrolls: +55,000
・Previous: -23,000
・Unemployment rate: 4.1%
・Previous: 4.1%
・Labor-force participation rate: 61.5%
・Previous: 61.4%
・Average hourly earnings: +0.3% month-on-month
・Previous: +0.1%
・Average hourly earnings: +3.1% year-on-year
・Previous: +3.2%
It is necessary to assess not only nonfarm payrolls, but also the unemployment rate, average hourly earnings, labor-force participation, and revisions to prior data.
The previous payroll reading was weak at a 23,000 decline. If labor-market weakness persists this time, concerns over a U.S. economic slowdown could intensify rapidly.
■ If the Employment Report Is Strong
If payroll growth clearly exceeds forecasts, the unemployment rate does not rise, and wage data is also strong, expectations of U.S. rate hikes are likely to strengthen again.
The expected reaction would be:
Stronger U.S. employment
→ Rising expectations of U.S. rate hikes
→ Higher long-term U.S. yields
→ Dollar buying
→ Higher USD/JPY
USD/JPY may break above today’s high near 156.58 and test a recovery of 157.
However, if strong wage growth heightens inflation concerns and causes a sharp decline in U.S. equities, risk-off yen buying is also likely to emerge. In that case, the dollar may rise against the euro and pound, while gains in USD/JPY remain limited.
■ If the Employment Report Is Weak
If payrolls fall short of expectations, the unemployment rate rises, and wage growth slows, expectations of U.S. rate hikes are likely to recede.
The expected reaction would be:
Weaker U.S. employment
→ Fading expectations of U.S. rate hikes
→ Lower U.S. yields
→ Dollar selling
→ Lower USD/JPY
In this case, yesterday’s low near 155.30 would become the first downside target.
A clear break below 155.30 would bring the 155.00 threshold into focus, followed by the 154 range.
Furthermore, if weaker employment data triggers renewed equity losses, dollar selling and yen buying could occur simultaneously, accelerating USD/JPY’s decline.
■ If the Data Is Mixed
The market expects payrolls to recover and average hourly earnings to accelerate month-on-month, while year-on-year wage growth is expected to slow.
There is a meaningful possibility that the results will be mixed.
For example, even if payrolls are strong, the unemployment rate may rise. Or, payrolls could be weak while average hourly earnings surprise to the upside. In such cases, the initial market reaction could reverse quickly.
The market may first react to nonfarm payrolls immediately after release, then change direction after assessing the unemployment rate, wage data, and revisions to prior figures.
■ Expanding Yen-Appreciation Hedging
One-week USD/JPY implied volatility briefly rose to 13.59% and remains elevated in the 12% range.
This is approaching the 14%–15% range recorded during the yen-buying intervention on 3 August.
In addition, the one-month 25-delta risk reversal briefly declined to negative 2.845. This indicates that demand for yen calls to hedge against USD/JPY declines is stronger than demand for dollar calls to hedge against yen weakness.
In other words, even if USD/JPY rebounds in the spot market, the options market continues to price in concern about further yen appreciation.
As long as this hedging demand remains, USD/JPY is likely to attract selling on rallies.
To conclude that yen-appreciation pressure has eased, it will be necessary to see not only a rebound in USD/JPY, but also a decline in one-week volatility and reduced demand for yen calls in the risk-reversal market.
■ USD/JPY
USD/JPY has rebounded from around 155.30 to around 156.58, but gains have paused near 156.40.
Key upside levels are as follows.
・156.58: Today’s high
・157.00: Psychological threshold
・Mid-157 range: Price zone before the decline
Key downside levels are as follows.
・156.00: Near-term threshold
・155.30: Yesterday’s low
・155.00: Psychological threshold
Whether the pre-employment-report rebound is merely position adjustment or marks a shift in the yen-strengthening market will depend in part on whether USD/JPY can recover 157.
■ EUR/USD and GBP/USD
Dollar buying is slightly dominant during the London morning session.
EUR/USD has extended today’s low to around 1.1616, while GBP/USD has reached around 1.3522.
However, ranges remain limited as traders avoid taking aggressive positions ahead of the employment report.
・EUR/USD: 1.1616–1.1633
・GBP/USD: 1.3522–1.3549
Strong employment data would likely weigh on EUR/USD and GBP/USD, while weak results could trigger rebounds.
Even if U.S. yields decline, a sharp equity-market decline could still attract safe-haven dollar buying. In that case, USD/JPY may fall while EUR/USD and GBP/USD also decline.
■ Other Market Developments
The U.S. 10-year Treasury yield is trading near 4.76%.
NY crude futures have edged lower toward $91, while European equities are trading around the previous day’s closing levels.
After the employment report, equity-market reaction will be important in addition to U.S. yields.
If rising U.S. yields and higher equities occur at the same time, USD/JPY is likely to rise. Conversely, if yields rise alongside falling equities, dollar strength and yen strength may conflict, making USD/JPY direction more unstable.
■ Key Events Today
・U.S. August employment report
・Revisions to prior nonfarm payroll figures
・Unemployment rate and labor-force participation rate
・Average hourly earnings
・U.S. 10-year Treasury yield
・U.S. equity-market reaction
・One-week USD/JPY implied volatility
・Persistence of yen-call demand
・Canada August employment report
・Eurozone July retail sales
・Further remarks from Federal Reserve officials
■ Summary
Today’s main focus is the U.S. employment report, due at 12:30 London time.
Expectations of Bank of Japan rate hikes are strengthening, while the next FOMC is now almost evenly split between holding rates steady and raising them. This change in monetary-policy expectations is supporting the yen’s rise this week.
Strong employment data could revive expectations of U.S. rate hikes and push USD/JPY toward a recovery of 157. Weak data would bring yesterday’s low near 155.30 into focus, followed by the risk of a break below 155.
However, yen-appreciation hedging demand remains strong in the options market. Even if USD/JPY rebounds, it is difficult to conclude that yen-strengthening pressure has ended unless volatility and risk reversals normalize.
It will be important to assess not only the immediate reaction after the release, but also U.S. yields, equities, average hourly earnings, prior-period revisions, and price action through the late New York session.
