USD/JPY trades with positive bias near 161.00, just below its highest level since 1986

• USD/JPY stands tall near a multi-decade high amid the big US-Japan rate differential. 
• Intervention fears might hold back bulls from placing fresh bets around the major.
• Traders now look forward to the US ISM Manufacturing PMI for short-term impetus.

The USD/JPY pair kicks off the new week on a subdued note and consolidates its recent strong gains to the highest level since December 1986 touched on Friday. Spot prices currently trade with a mild positive bias around the 161.00 mark, though the upside seems limited in the wake of speculations about an imminent intervention by Japanese authorities to support the domestic currency. 

In fact, Japan's Finance minister Shunichi Suzuki told a news conference on Friday that excessive volatility in the currency market is undesirable and that authorities will respond appropriately to such moves. Meanwhile, Japan appointed Atsushi Mimura as the new top foreign exchange diplomat on Friday. The move, however, does little to provide any respite to the Japanese Yen (JPY) as investors are uncertain about Atsushi's stance on currency policy. This, along with the wide interest rate differential between the United States and Japan, might continue to act as a tailwind for the USD/JPY pair. 

The Bank of Japan (BoJ), so far, has failed to provide any cues about the timing of the next rate increase. In contrast, the Federal Reserve (Fed) sounded more hawkish at the end of the June policy meeting and forecasted only one interest rate cut in 2024. Moreover, the increasing odds of a Trump presidency raise worries about the imposition of aggressive tariffs, which could fuel inflation and trigger higher interest rates. This, in turn, lifts the US Treasury bond yields to a multi-week top and continues to underpin the US Dollar, lending additional support to the USD/JPY pair and validating the positive outlook. 

The markets, meanwhile, are still pricing in a greater chance of a September Fed rate cut amid signs of easing inflation. The bets were reaffirmed by the US Personal Consumption Expenditures (PCE) Price Index, which confirmed the disinflationary trend as shown by the Consumer Price Index (CPI) and Producer Price Index (PPI) for May. This might hold back the USD bulls from placing aggressive bets and cap the upside for the USD/JPY pair. Traders now look to important US macro releases scheduled at the start of a new month, starting with the ISM Manufacturing PMI later this Monday, for a fresh impetus.