FX Empire – Japanese Consumer Confidence
Notably, consumer confidence slumped from 34.1 in March to 31.2 in April, as President Trump’s tariff policies hit sentiment. However, confidence has improved sharply in H2 2025. Crucially, Trump cut tariffs on Japanese goods from 25% to 15% in September, which should lift sentiment.
A pickup in consumer confidence will likely boost demand for the yen, aligning with a bearish USD/JPY outlook.
Household Spending: A Key Confirmation Indicator
On Friday, December 5, household spending figures will indicate whether lower tariffs and the upward trend in consumer confidence have translated into higher consumption.
Economists forecast household spending to rise 0.7% month-on-month in October, reversing a 0.7% drop in September. A rebound in spending would signal a pickup in economic momentum and potentially higher inflation. These dynamics would support a December BoJ rate hike, boosting demand for the Japanese yen.
Economists Maintain a Hawkish BoJ Outlook
For context, private consumption increased 0.1% quarter-on-quarter in Q3, after expanding 0.4% in Q2. Weaker consumption contributed to the 0.4% quarterly economic contraction.
However, economists brushed aside the Q3 data, maintaining expectations of a near-term BoJ policy adjustment. According to November’s Reuters poll, conducted between November 11 and 18:
43 of 81 economists (53%) expected the BoJ to raise interest rates to 0.75% at the December policy meeting. In October, 31% of economists predicted a December rate hike.
100% of economists forecast a 0.75% borrowing rate by the end of March, up from 96% of respondents in the October poll.
Meanwhile, the median prediction for the policy rate at the end of 2026 remained unchanged at 1.00%.
Stronger consumer confidence and a recovery in household spending will reinforce confidence in a December hike.
BoJ Communications on Watch
With key economic reports set to influence sentiment toward the Fed rate path, traders should also monitor BoJ speeches.
On Monday, December 1, BoJ Governor Kazuo Ueda is on the calendar to speak. His views on wages and the effect of US tariffs on the Japanese economy are likely to set the tone for the week. Support for a December rate hike on sticky inflation and an upswing in retail sales would send USD/JPY lower.
Follow our real-time updates to stay ahead of USD/JPY market developments.
US Economic Calendar: Fed Rate-Cut Bets in Focus
As Japan’s policy outlook turns hawkish, US economic reports could fuel speculation about a December Fed rate cut.
Key data releases for the week ahead include:
ISM Manufacturing PMI (December 1): Forecast to slip from 48.7 in October to 48.6 in November.
ADP Employment Change (December 3): Expected to rise by 20k in November, down from 42k in October.
ISM Services PMI (December 3): Forecast to fall from 52.4 in October to 52.1 in November.
Initial Jobless Claims (December 4): Expected to increase from 216k week ending November 22 to 218k week ending November 29.
Core PCE Price Index (November 26): Forecast to increase 2.9% YoY in September, matching August’s rise.
Slower private sector activity, a weaker labor market, and softer-than-expected US inflation will raise bets on a December Fed rate cut, bearish for USD/JPY.
Fed Chair Powell speaks on Tuesday, December 2; support for a December cut will likely accelerate the USD/JPY pair’s reversal from Q4’s 5.63% rally. USD/JPY briefly dropped from 157.541 to the mid-155 region last week on rising Fed-cut speculation. A move toward 150 in the coming week is plausible.
Market View: Medium-Term Yen Strength
In my opinion, USD/JPY will likely drop below 150 on rising prospects of a BoJ rate hike and a Fed rate cut. A dovish Fed and hawkish BoJ would reinforce the bearish medium-term outlook, making downside protection essential for long-USD/JPY positions. A 150 stop loss is appropriate for traders carrying longs through H2 2025.
AloJapan.com