Japanese Yen struggles near multi-month low, seems vulnerable amid BoJ uncertainty

• The Japanese Yen is weighed down by doubts over the likely timing of the next BoJ rate hike.
• The recent widening of the US-Japan yield differential also undermined the lower-yielding JPY.
• The USD holds steady near a two-year top and supports USD/JPY ahead of the US NFP report. 

The Japanese Yen (JPY) ticks higher in reaction to comments from Japan's Economy Minister Ryosei Akazawa during the Asian session on Friday, albeit it lacks bullish conviction amid the Bank of Japan (BoJ) rate hike uncertainty. Data released earlier today showed that real household spending in Japan fell for the fourth month in November and pointed to an economic fragility. This gives the BoJ another reason to be cautious about raising interest rate hikes further, which might continue to undermine the JPY. 

Furthermore, the US-Japan bond yield differentials have widened significantly over the past month in the wake of the Federal Reserve's (Fed) hawkish shift. This might further contribute to capping the lower-yielding JPY and should act as a tailwind for the USD/JPY pair amid a bullish US Dollar (USD). Meanwhile, traders might opt to move to the sidelines and wait for the release of the crucial US Nonfarm Payrolls (NFP) report before placing aggressive directional bets around the currency pair. 

Japanese Yen struggles to attract any buyers amid the BoJ rate-hike uncertainty

• Japan's Economy Minister Ryosei Akazawa said this Friday that Japan's economy is at a 'critical stage' in eradicating the public's deflationary mindset and shifting to a phase where growth is spearheaded by higher wages and investment.
• Government data released earlier today showed that inflation-adjusted household spending in Japan – a key indicator of private consumption – fell for the fourth month, by 0.4% in November from a year earlier amid stubbornly high prices. 
• This comes on top of a drop in real wages for the fourth consecutive month in November and points to broadening inflationary pressure, which keeps the door open for another interest rate hike by the Bank of Japan in January or March.
• Some investors, however, are betting that the BoJ may wait until April to seek confirmation that strong wage momentum will carry over into the spring negotiations between companies and labor unions before pulling the trigger. 
• The yield on the benchmark 10-year US government bond remains well within striking distance of its highest levels since the middle of last year touched last week amid the Federal Reserve's hawkish shift after the December meeting. 
• Boston Fed President Susan Collins said on Thursday that the economy is on gradual, uneven trajectory back towards the 2% inflation target and the current outlook calls for a gradual and a patient approach to interest rate cuts.
• Philadelphia Fed President Patrick Harker noted that it is taking longer to get back to 2% inflation than expected. He added that the US central bank is still expected to continue to cut rates but explained that the path will depend on data.
• Kansas Fed President Jeffrey Schmid noted that inflation is moving toward target and growth is showing momentum, while the jobs market is weaker but still healthy. Any further interest rate cuts should be gradual and data-driven.
• Fed Board of Governors member Michelle Bowman said that the current stance of policy may not be as restrictive as others may see it and pent-up demand following the election could pose inflationary risks.
• The US Dollar stands tall near a two-year peak and assists the USD/JPY pair to hold steady above the 158.00 mark as traders keenly await the release of the US jobs data – popularly known as the Nonfarm Payrolls report later today.

USD/JPY seems poised to climb further; break out through a short-term range awaited

From a technical perspective, the near-term bias remains tilted in favor of bullish traders, though the recent range-bound price action makes it prudent to wait for some meaningful buying before positioning for any further gains. The 158.55 area, or the multi-month top touched on Wednesday, could act as an immediate hurdle, above which the USD/JPY pair could aim to reclaim the 159.00 mark. The momentum could extend further towards the 159.45 intermediate hurdle en route to the 160.00 psychological mark.

On the flip side, the overnight swing low, around the 157.60-157.55 region, might continue to protect the immediate downside. Some follow-through selling, however, could make the USD/JPY pair vulnerable to accelerate the slide towards the 157.00 mark en route to the next relevant support near the 156.75 region and the weekly low, around the 156.25-156.20 area. This is followed by the 156.00 mark, which if broken decisively might shift the near-term bias in favor of bearish traders and pave the way for deeper losses.