**Fundamental Summary:**

**1. US Considers New National Security Tariffs on Auto Parts**

The US Commerce Department announced Tuesday it will consider industry requests in the coming weeks to impose tariffs on additional imported auto parts citing national security concerns.

In May this year, Trump imposed 25% auto tariffs on imports of cars and auto parts worth over $460 billion annually, but has since reached agreements with some countries to reduce these tariffs. The US Commerce Department stated Monday that domestic auto or auto parts manufacturers or any industry associations can request tariffs on other components that may affect national security.

The department noted: "The automotive industry is in a period of rapid development across various technologies, including alternative propulsion systems, autonomous driving capabilities and other advanced technology areas." It added that the automotive industry needs "opportunities to identify emerging automotive products that are significant for defense applications."

Last month, the US Commerce Department announced it would raise steel and aluminum tariffs on over 400 products, including numerous auto parts, with annual imports worth $240 billion. These parts include automotive exhaust systems, electrical steel, and bus components needed for electric vehicles.

On Tuesday, multiple groups including the Chamber of Commerce and trade associations representing US and foreign automakers and auto parts companies urged the Commerce Department to "eliminate further unpredictable expansion."

These groups stated in a letter that "recent expansions have been implemented without adequate notice, bringing enormous unexpected costs, complexity and uncertainty to US businesses."

**2. Bank of Japan Interest Rate Policy Expectations**

The Bank of Japan is expected to maintain stable interest rates this week while remaining cautiously optimistic about the economy's ability to withstand US tariff impacts. This maintains market expectations that the BOJ may raise borrowing costs again this year.

Governor Kazuo Ueda may warn that tariff impacts and signs of US economic weakness increase uncertainty, putting pressure on Japan's export-dependent economy outlook. The BOJ meeting will be held days after the Federal Reserve meeting, with markets widely expecting the BOJ to maintain rates at 0.5% unchanged at the meeting ending September 19. Markets are watching Ueda's post-meeting press conference to gauge the timing of rate hikes. The BOJ has paused rate increases since January to assess tariff impacts.

Ueda may also comment on when the BOJ will sell its holdings of exchange-traded funds (ETFs), an issue of broad market interest. Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities, noted that Ueda may not clearly hint whether the BOJ will raise rates in October, as the central bank wants to further examine tariff impacts. She also said signs of US economic weakness may affect the BOJ's rate hike timing, predicting the BOJ's next rate increase in January.

A Reuters survey shows most economists expect another 25 basis point rate increase before year-end, but there's significant disagreement on timing, mainly between October and January. Sources familiar with BOJ thinking believe that despite massive tariff impacts, as Tokyo and Washington sign trade agreements, BOJ policymakers increasingly believe Japan won't fall into recession.

Deputy Governor Ryozo Himino warned that tariff shocks will begin to intensify, so the BOJ prefers to gather more data before acting. Analysts emphasize that the BOJ's quarterly "Tankan" business survey to be released October 3 is key, as it can show whether companies can withstand tariff shocks and continue raising wages. Recent weak US employment data has also increased BOJ concerns, as US economic slowdown could undermine Japan's economic recovery prospects.

Divergent policy paths between the Fed and BOJ could lead to yen appreciation, further hitting Japanese exporters. Some analysts note that political uncertainty from Prime Minister Shigeru Ishiba's resignation could also hinder BOJ rate increases in the near term. If the BOJ remains inactive for long periods, it will lag in addressing inflation risks, especially with real rates still in deeply negative territory.

The BOJ expects food price increases to moderate due to high base effects from last year, but rising living costs may lead to persistent inflation. Hawkish member Naoki Tamura emphasized at a late June press conference that if upside inflation risks intensify, the BOJ needs decisive action to maintain price stability. If the BOJ becomes more confident the economy is sustainably achieving the 2% inflation target, Ueda may reaffirm determination to continue rate increases.

**3. Japan's Ruling Party Leadership Race Intensifies**

Japan's Agriculture Minister and government chief spokesman joined the ruling party leadership race Tuesday, with elections scheduled for early next month to succeed outgoing Prime Minister Shigeru Ishiba.

Ishiba has announced his resignation, taking responsibility for a series of devastating election defeats, making the Liberal Democratic Party (LDP) new leadership selection more complex.

Agriculture, Forestry and Fisheries Minister Shinjiro Koizumi announced at a press conference that he expressed his candidacy intention to supporters over the weekend, with Finance Minister Katsunobu Kato leading his campaign. Koizumi is the son of former Prime Minister Junichiro Koizumi, with this year's key task being curbing soaring rice prices. Kato, who received the lowest votes in last September's LDP presidential election, decided to support Koizumi, emphasizing party unity.

Chief Cabinet Secretary Yoshimasa Hayashi, the Ishiba government's chief spokesman, announced his candidacy, emphasizing he will use his experience and achievements to promote a new government balancing stability and growth. Last week, former Foreign Minister Toshimitsu Motegi was first to announce his candidacy, followed by former Economic Security Minister Takayuki Kobayashi.

Former Internal Affairs Minister Sanae Takaichi is also expected to announce her candidacy this week. She supports government stimulus and monetary easing policies and could potentially become Japan's first female leader. Media polls show Shinjiro Koizumi and Sanae Takaichi are considered frontrunners. These five candidates also participated in last year's leadership election won by Shigeru Ishiba.

Takayuki Kobayashi unveiled his policy platform, including temporary income tax cuts, long-term income tax reform, and strengthened controls on immigration and foreign purchases of Japanese companies and land. He noted Japan is in transition from a deflationary economy to a growth economy, emphasizing that BOJ monetary policy will adjust accordingly as the economy enters a growth phase.

The LDP and its coalition partner Komeito lost majority seats in both houses of parliament during Ishiba's tenure, making the next leader's selection more complex than before.

Today, September 17, Wednesday, Japan has no major economic data releases, with market focus on the US Federal Fund Rate announcement at 2:00 AM Beijing time the next day, FOMC Federal Open Market Committee statement, and 2:30 AM FOMC press conference.

**Economic Information**

Data released September 16 by Japan's Cabinet Office showed Japan's output gap rose to 0.3% in the April-June quarter, the highest level since July 2019, up from the preliminary 0.1%, reflecting continued improvement in economic supply and demand conditions.

The same day, Japan's Ministry of Land, Infrastructure, Transport and Tourism released national standard land price changes. As of July 1, 2025, national average land prices for residential, commercial and all uses achieved four consecutive years of increases, rising 1.5%, the highest since 1992. Factors driving land price increases include solid residential demand, hotel and commercial facility development investment from foreign tourists, and continued overseas capital inflows amid yen weakness. Three major metropolitan areas saw significant land price increases of 4.3%, with regional areas also maintaining upward trends.

By specific use, residential land nationwide rose 1.0%, commercial land rose 2.8%. Hokkaido's Furano saw residential land prices surge 27.1% due to overseas capital developing resort areas; Chitose's commercial land jumped 31.4% influenced by semiconductor company Rapidus entering. Tokyo's Ginza remained the nation's highest-priced land area for 20 consecutive years.

Meanwhile, the Trump administration formally reduced tariffs on Japanese imported cars from 27.5% to 15% on September 16. This reduction is based on previously reached US-Japan tariff agreements. While significantly lower than the imposed period, it remains higher than the Trump administration's initial 2.5% level. Japan exports about 1.37 million vehicles annually to the US, and reduced tariff burden is expected to ease automotive industry pressure, though companies still face higher costs. Additionally, the US and Japan agreed to generally set "reciprocal tariffs" at 15%, retroactively effective from August 7, but civilian aircraft and parts were not included in the levy scope.

**Political Information**

The LDP presidential election campaign will officially launch September 22, with multiple politicians recently announcing candidacies and intra-party factional alliances gradually becoming clear.

Current Chief Cabinet Secretary Yoshimasa Hayashi officially announced his candidacy on the 16th. At a press conference, he emphasized fully utilizing his experience as former Foreign Minister and Defense Minister to promote "stability and growth-focused" governance, proposing policies ensuring wage growth consistently exceeds prices. Defense Minister Gen Nakatani publicly supported Hayashi, calling him "extremely capable of policy execution," especially in security, diplomacy and economic fields for decisive decision-making, praising his ability to unite the party and lead the cabinet.

Agriculture Minister Shinjiro Koizumi has also expressed candidacy intentions to supporters and is steadily advancing preparations. To gain conservative party support, Koizumi invited former Chief Cabinet Secretary and Finance Minister Katsunobu Kato to lead his campaign team's election strategy headquarters, receiving agreement. Kato expressed support for Koizumi based on "promoting LDP unity and policy advancement" considerations. This move is also interpreted as balancing Koizumi's previously liberal stance on issues like separate surname systems for married couples.

Former Economic Security Minister Takayuki Kobayashi officially announced his candidacy the same day, focusing on economic growth and security strengthening. He proposed implementing "limited-term individual income tax flat rate cuts" and advocated further increasing defense spending beyond the current 2% of GDP level, quickly revising the "National Security Strategy."

One focus of this election is evaluating the LDP and Komeito's promised high inflation countermeasures and cash subsidy distribution policies from the upper house election. Additionally, former Secretary-General Toshimitsu Motegi, who announced candidacy, is actively conducting policy promotion activities. With Prime Minister Ishiba expressing resignation intentions, the new president will be elected October 4 and is expected to assume the prime minister position, leading subsequent Diet responses and policy adjustments.

**Financial Information**

On September 16, Tokyo stock markets hit new closing highs for the fourth consecutive trading day. The Nikkei 225 index rose 0.30% to close at 44,902.27 points, breaking above 45,000 points intraday for the first time; the TOPIX index rose 0.25% to close at 3,168.36 points, also setting new historical highs.

Market gains were driven by multiple positive factors: positive signals emerged in US-China trade negotiations, with both sides reaching preliminary consensus on TikTok's US business, strengthening investor expectations for improved bilateral trade relations. Meanwhile, overnight US stocks rose on widespread market expectations that the Federal Reserve will decide to cut rates at the upcoming FOMC meeting, further boosting Tokyo market sentiment.

Sectorally, semiconductors and related technology stocks performed outstandingly. Disco surged 8.2%, Kioxia Holdings rose 6%, while Tokyo Electron, Lasertec and Advantest rose 1.9%, 1.4% and 1.3% respectively, becoming leading gainers.

On the other hand, markets expect the BOJ to maintain the current 0.5% policy rate unchanged at this week's policy meeting. Policymakers are closely monitoring potential impacts of US tariff policies on Japan's export-dependent economy, maintaining cautious observational attitudes.

**Geopolitical Conflicts**

On September 16, conflicts continued escalating globally in multiple regions, drawing widespread international attention.

In Ukraine, Russian forces launched large-scale attacks on the southeastern city of Zaporizhzhia, causing at least 1 death and 18 injuries, including two children. According to Governor Ivan Fedorov, Russian forces used multiple rocket systems for 10 strikes, damaging 10 apartment buildings and 12 private residences. Ukrainian President Zelensky stated Russian forces also fired over 100 drones and about 150 glide bombs at central, southern and eastern Ukraine that night. He again called for Western countries to provide joint air defense protection. Meanwhile, the Trump administration approved the first $500 million weapons aid to Ukraine under new financial mechanisms, including air defense systems to counter increasingly frequent Russian airstrikes.

Middle East tensions further deteriorated. The Israel Defense Forces launched massive ground offensives against Gaza City, claiming to target up to 3,000 Hamas militants. Palestinian sources reported this as the most intense bombing in two years of war, causing massive casualties, destroying buildings in multiple locations, and forcing thousands to flee. Israeli Defense Minister said "Gaza is burning," but UN High Commissioner for Human Rights Volker Türk called for Israel to immediately stop attacks, noting increasing evidence Israel may be committing war crimes and crimes against humanity. The UN Investigation Commission determined the same day that Israel was implementing genocide in Gaza, which Israel strongly denied.

Additionally, Israel struck Houthi military facilities at Yemen's Hodeidah port. Houthis have repeatedly attacked Red Sea vessels, expressing solidarity with Gaza Palestinians. The Israeli Defense Minister said they would continue targeting the organization.

**Technical Analysis**

**1. Technical Summary:**

Tuesday's data showed US import prices unexpectedly rose in August, mainly driven by higher capital goods and consumer goods costs, indicating domestic inflation may accelerate in coming months.

US Labor Department data showed August import prices rose 0.3%, higher than economists' widely predicted 0.1% decline. Although import prices exclude tariffs, higher readings indicate exporting countries aren't absorbing Trump administration tariff costs. Import prices were flat over the past 12 months, while core import prices rose 1.0% year-over-year, partly influenced by dollar weakness. Import consumer goods prices excluding autos rose 0.7%, capital goods rose 0.5%. Meanwhile, fuel and food import prices declined.

In retail, August US retail sales growth exceeded expectations, maintaining strong growth for three consecutive months. Commerce Department data showed retail sales rose 0.6% month-over-month, far above the expected 0.2%. After data release, the dollar index rebounded slightly.

Morgan Stanley Wealth Management Chief Economic Strategist Alan Zentner noted US consumer sentiment remains positive, which is a positive economic signal but may intensify Fed disagreements on rate cut magnitude.

LPL Financial Chief Economist Jeffrey Roach believes increased discretionary spending like dining indicates solid consumer foundations, reducing recession risks. However, Wells Fargo Senior Economist Sam Bullard warned that labor market weakness could lead to future spending slowdowns, with low-income groups most severely impacted.

Correspondingly, FICO reports show US consumers are feeling dual pressures from inflation and rising interest rates. National average credit scores declined slightly, with Generation Z most severely affected by student loan burdens, with delinquency rates hitting historical highs.

FICO noted that while overall average scores remain at high levels of 715, this indicator has lagging characteristics and future risks cannot be ignored. Some banks emphasized that although the job market is cooling, overall consumer credit conditions remain stable.

In real estate, high interest rates continue suppressing demand, extending market doldrums. Surveys show US home price growth will be limited in coming years, with only about 3% modest recovery possible by 2027. ING Chief International Economist James Knightley stated that due to tight labor markets, housing demand remains weak, and if unemployment rises, some homeowners may be forced to sell. Mortgage rates are expected to remain above 6% for several years, far higher than pre-pandemic levels, heavily burdening first-time buyers. The average age for young Americans buying homes has risen to 38.

Most analysts believe that even if the Fed cuts rates, it's difficult to significantly lower long-term mortgage rates, and home affordability improvements will be very limited.

Meanwhile, the Fed internally faces political interference. Court rulings allowed Governor Lael Brainard to continue participating in policy meetings, avoiding chaos from the rare situation of presidential attempts to dismiss governors. Nevertheless, external concerns about Fed independence continue fermenting. This week's policy meeting is expected to cut rates by 25 basis points, the first cut since December last year.

Analysts widely believe labor market instability and persistent inflation pressures will be core discussion topics, with the Fed's future policy path remaining highly uncertain.

Overall, US August import prices unexpectedly rose, retail sales continued growing, but labor market weakness and inflation pressures create consumer outlook concerns. FICO reports show some consumer credit conditions deteriorating, student loan delinquency rates rising, intensifying financial fragility. Real estate markets remain depressed due to high interest rates, with first-time buyers heavily burdened. Meanwhile, the Fed is expected to cut rates modestly under political pressure, with employment and inflation remaining core concerns. Multiple overlapping factors weaken market confidence in the US economy, reinforcing dollar downward patterns.

During Tuesday trading, influenced by dollar weakness, USD/JPY also showed significant softening, with intraday highs touching 147.77 levels, closing at 147.23 levels.

Technical indicators show daily Bollinger Band upper rail entry points toward 148.50 area levels provide short-term dynamic resistance for exchange rates, Bollinger Band middle rail running lines toward 147.45 area levels provide potential strength-weakness differentiation, Bollinger Band lower rail entry points toward 146.50 area levels provide short-term dynamic support. Current exchange rates fell to Bollinger Band lower rail areas, indicating intensified short-term downside risks. Bollinger Band openings show initial weak expansion signs from extremely narrow states, indicating rising short-term volatility while intensifying potential breakout risks. Meanwhile, 14-day RSI relative strength indicators are near 41.90 areas, jointly verifying short-term trend weakness with Bollinger Band indicators, intensifying potential downside risks.

Technical structures show current exchange rates have broken below the 148.50-146.85 consolidation range lower boundary, presenting range breakout conditions with intensified potential downside risks. If USD/JPY can consistently close below 146.85 area levels over the next two trading days, it will strengthen market bearish sentiment, intensifying risks of downside testing toward 145.40 area levels.

For upside structures, 146.85 area levels remain major short-term resistance, requiring daily closes above 146.85 areas to potentially drive active market bullish sentiment, providing confidence support for upside testing toward August 1 highs of 150.90 area levels.

**2. Technical Indicator Summary:**

[Technical indicator details maintained as in original]

**3. Trading Strategy Analysis:**

**USD/JPY Intraday Focus Range:** 146.85-146.20

The US Federal Fund Rate announcement at 2:00 AM Beijing time the next day, FOMC Federal Open Market Committee statements, and 2:30 AM FOMC press conferences may become major driving factors for USD/JPY short-term trends.

Markets widely expect the Fed to initiate this year's first rate cut, with core debate on whether the cut magnitude is 25 or 50 basis points. Despite continued US labor market weakness, consumer spending remains resilient, with markets more focused on whether Fed Chair Powell will hint in post-meeting statements that this rate cut marks the beginning of a more accommodative monetary policy cycle. If Powell maintains data-dependent cautious stances, this will provide short-term rebound support for the dollar; conversely, if he hints at beginning new easing cycles, it will further strengthen dollar downward patterns, intensifying short-term dollar downside pressures.

Technical indicators show 4-hour Bollinger Band upper rail entry points toward 148.10 area levels provide short-term dynamic resistance, Bollinger Band middle rail running lines toward 147.30 area levels define potential strength-weakness differentiation, Bollinger Band lower rail entry points toward 146.50 area levels provide short-term dynamic support. Current exchange rates broke below Bollinger Band lower rails, showing bearish momentum dominance. Bollinger Band openings show expansion phenomena, accompanied by middle and lower rails turning downward, indicating rising short-term volatility while strengthening bearish persistence. Meanwhile, 4-hour 14-day RSI relative strength indicator readings of 30.70 are near extreme oversold areas, jointly verifying current trend weakness with Bollinger Band indicators, requiring caution for potential short-term technical correction needs.

From 4-hour perspectives, USD/JPY short-term resistance is constructed at 146.85 area levels. If intraday exchange rates can break through this area limitation, they tend toward upside testing of 147.60 area levels. If exchange rates can achieve further breakthroughs at these area levels, they may rise to challenge 148.50 short-term important resistance areas. Additionally, 146.20 area levels below constitute short-term support. If intraday exchange rates lose this area defense, it may intensify risks of downside testing toward 145.75 area levels. If these area levels suffer further losses, downside risks will expand to 145.40 area levels.

Overall, current market short-term sentiment tends cautiously bearish. If intraday exchange rates can break through 146.85 area limitations, they may drive short-term bullish sentiment, providing confidence support for upside testing toward 147.95 or even 148.50 area levels. However, if they lose 146.20 area defenses, it will strengthen short-term bearish market patterns, intensifying risks of downside testing toward 145.75 or even 145.40 area levels.

**USD/JPY Short-term Trend Path Reference:** **Upside:** 146.85-147.60-148.50 **Downside:** 146.20-145.75-145.40

**USD/JPY Short-term Trading Recommendations:** Wait for 146.85-146.20 price range 1-hour closing signals, using breakout trading.