The USD/JPY pair continued its weak consolidation during Friday's Asian trading session, hovering around 156 with limited intraday movement, but remaining within a clear recent correction trend. Current prices are near August's lows, and the market remains cautious ahead of the US August non-farm payroll report. The recent decline in USD/JPY is not solely driven by dollar weakness, as monetary policy expectations for both the dollar and yen are shifting simultaneously; the yen's own policy premium is also widening. A key reason for the recent pressure on the US dollar stems from the readjustment of Federal Reserve policy expectations. Federal Reserve Governor Christopher Waller stated on Thursday that US inflation has shown some signs of cooling, and if subsequent data continues to improve, it would be reasonable for the Fed to maintain interest rates unchanged at its next policy meeting. This statement reduced market bets on further Fed tightening and pushed US Treasury yields down, causing the dollar to fall to its lowest level in over a week. This change directly pressured the USD/JPY pair. Since the USD/JPY is highly sensitive to the USD/JPY interest rate differential, a decline in US yields means a narrowing yield advantage for holding dollar assets relative to yen assets. When the Bank of Japan simultaneously signals a more aggressive interest rate hike, the impact of interest rate differential changes on the exchange rate will be further amplified. Currently, the market has significantly increased its expectations for future interest rate hikes by the Bank of Japan. Investors have largely priced in the possibility of a 25 basis point rate hike at the Bank of Japan's September 17-18 meeting, and are also betting on room for further policy rate adjustments in December. Compared to the previously relatively cautious policy path, this means that expectations for the normalization of Japanese monetary policy are accelerating. Recent comments by Bank of Japan Director Hajime Takada regarding the pace of policy have further fueled this change. He believes the Bank of Japan should adopt a more flexible approach in deciding whether to raise interest rates, rather than relying excessively on a fixed semi-annual adjustment schedule. The market therefore believes that if inflation and economic data continue to meet the conditions for policy normalization, the Bank of Japan may act more quickly based on the actual situation. This change in policy expectations is crucial for the yen. Historically, the market has relied on the US-Japan interest rate differential for carry trades, but with Japanese interest rates gradually rising and US interest rates potentially falling, the profit margin for carry trades is narrowing. Once the market begins to actively reduce its long dollar positions while increasing its yen holdings, USD/JPY is prone to accelerated declines. Furthermore, market concerns about potential intervention by Japanese authorities in the foreign exchange market also limit the upside potential of USD/JPY. When the exchange rate approaches higher levels again, investors will pay closer attention to whether Japanese officials might take action to stabilize the yen. While mere intervention expectations may not be enough to form a sustained trend, they can significantly increase the risk cost of establishing long positions in USD/JPY at higher levels. Currently, the most important short-term variable in the market remains the US August non-farm payroll report. Employment data not only affects the dollar's own trajectory but will also directly change the market's judgment on the future policy path of the Federal Reserve. If new job growth is significantly weaker than expected, while the unemployment rate shows signs of rising, expectations that the Federal Reserve will maintain interest rates or even further shift to easing may strengthen, potentially leading to a continued decline in US yields and further downward pressure on USD/JPY. Conversely, if the US job market performs significantly better than expected, the dollar may gain short-term rebound momentum. Stronger employment data suggests that the US economy remains resilient and may also prompt the market to reassess the Fed's policy choices in September. However, even if the dollar is supported by non-farm payroll data, rising expectations of a Bank of Japan rate hike may still limit the extent of the USD/JPY rebound. Therefore, the relative change between US employment data and Bank of Japan policy expectations will determine whether the USD/JPY rebound is a trend reversal or a short-term correction. From a broader market perspective, USD/JPY has already clearly retreated from its previous highs. There is a reassessment of how long US high interest rates can be sustained and how the interest rate differential between the two countries will change after the Bank of Japan ends its ultra-loose policy. As long as US economic data gradually cools down, and Japanese inflation and wage growth continue to remain resilient, the logic for a further narrowing of the USD/JPY interest rate differential remains, which will continue to provide medium-term support for the yen. From a daily chart perspective, USD/JPY remains in a clear correction pattern, with the price consistently approaching the 155.25-155.20 area, which corresponds to the August lows and is a key battleground between bulls and bears. A decisive break below 155.20 on the daily chart suggests the recent correction may extend further, with the pair potentially testing the 155.00 level. A breach of this level could open up further downside potential. Conversely, if significant buying pressure emerges around 155.20 and drives the price back up, it's crucial to watch whether the previously breached area can revert to support. Looking at the 4-hour chart, USD/JPY attempted to break above the 200-period moving average this week but failed to hold, subsequently weakening again. This indicates that short-term bullish momentum remains insufficient. The 155.20-155.25 area is currently a key zone for determining short-term direction. A break below this level, once confirmed, could push prices towards 155.00 or even lower. Conversely, a quick recovery above the 200-period moving average would alleviate short-term downward pressure. Looking further ahead, only a firm hold above the 160.00 level would significantly weaken the current bearish structure; otherwise, any rebound is more likely to be perceived as a technical correction. Editor's Summary: The USD/JPY pair is currently at a crucial stage of repricing expectations regarding US and Japanese monetary policy. Cooling expectations of further tightening by the Federal Reserve, rising bets on a Bank of Japan rate hike, and declining US yields have collectively supported the yen, pushing USD/JPY close to its August lows. In the short term, US non-farm payroll data will determine whether the dollar can rebound, but even with improved employment data, a potential September rate hike by the Bank of Japan could still limit the upside potential of USD/JPY.