Recent US CPI data showing September headline inflation at 3.7% year-over-year, above consensus, has reinforced expectations for additional Federal Reserve rate hikes, widening the policy gap with the Bank of Japan’s 1.25% rate and supporting USD/JPY near 158.50. The pair remains capped by intervention risks above 160, where Japanese and US authorities have signaled discomfort with further yen weakness following coordinated action earlier in 2026. Elevated US Treasury yields near 5.2% and geopolitical tensions boosting safe-haven demand for the dollar continue to underpin the currency, while BoJ officials monitor bond yields and leave room for gradual tightening, potentially in December. Traders are watching the October 28 FOMC meeting, subsequent inflation and employment releases, and any shift in oil prices that could affect Japan’s import costs for directional clues through year-end.