During Friday's Asian trading session, the U.S. dollar failed to extend its modest early rebound against the Japanese yen, with the pair oscillating around 158.00 and remaining within the trading range established over the past week or so.

Markets currently lack a clear single-direction driver: the dollar is under pressure from retreating U.S. Treasury yields, while the yen is being influenced by a combination of Japanese economic data, central bank policy expectations, and potential foreign exchange intervention risk.

These opposing forces are keeping each other in check, making traders reluctant to build aggressive directional positions for the time being.

Japan's latest household spending data showed that August household consumption expenditure fell on a year-over-year basis for the ninth consecutive month.

However, the actual decline was smaller than market expectations, and combined with real wages in Japan having grown for eight straight months, this suggests that household purchasing power may be showing some improvement.

While persistently weak consumption still reflects that Japan's domestic demand recovery remains fragile, wage growth helps strengthen the foundation for consumption and also provides justification for the Bank of Japan to continue advancing monetary policy normalization.

The Bank of Japan's policy path is a key factor influencing the yen's medium-term trajectory.

The foreign exchange strategy team at Rabobank noted that the BOJ's previous policy guidance was not as hawkish as the market had expected, but gradual interest rate hikes are still eroding the yen's appeal as a low-cost funding currency.

As Japanese interest rates gradually rise, the profit margin for investors engaging in carry trades by borrowing yen and buying higher-yielding assets may narrow, which helps alleviate some of the structural pressure the yen has long faced.

However, continued rate hikes by the BOJ do not necessarily mean the yen will keep appreciating.

USD/JPY remains highly dependent on changes in the U.S.-Japan interest rate differential.

If U.S. rates stay elevated while the BOJ tightens only slowly, carry trades could still provide support for USD/JPY.

Conversely, if U.S. yields decline while the BOJ sends clearer tightening signals, a narrowing U.S.-Japan rate differential could push the pair lower.

Potential foreign exchange intervention risk from Japanese authorities also caps the upside for USD/JPY.

With the pair persistently at high levels, traders remain vigilant about the possibility of official measures to support the yen.

This type of risk could not only affect market sentiment but also prompt investors to reduce long dollar positions near key price levels.

Even if fundamentals temporarily support the dollar, intervention concerns could still increase the risk of sudden price swings.

On the dollar side, retreating U.S. Treasury yields have become one source of short-term pressure.

U.S. President Trump stated that the United States will not resume military strikes on Iran before the November 3 midterm elections, easing market concerns about further disruptions to energy supplies.

Pressure on oil prices has also reduced some market worries about energy-driven inflation continuing to heat up.

Additionally, solid demand at the U.S. 30-year Treasury auction pushed yields down from previous highs, and the dollar index also retreated from around an 18-month high, limiting the rebound momentum for USD/JPY.

But Federal Reserve policy expectations still provide underlying support for the dollar.

Market-implied probability of a Fed rate hike in December remains above 80%, indicating that investors have not significantly abandoned the view that further tightening will occur this year.

At the same time, U.S.-Iran relations have not completely eliminated uncertainty.

The head of Iran's Atomic Energy Organization, Mohammad Eslami, said Iran will not halt uranium enrichment activities and will not give up its existing uranium stockpile.

Such statements mean that geopolitical risk premiums could still resurge repeatedly, and if the situation escalates again, safe-haven demand for the dollar could rebound.

Looking ahead, markets will focus on the University of Michigan's preliminary consumer confidence index and inflation expectation data, while also monitoring Fed officials' speeches and the latest developments in the geopolitical situation.

If U.S. economic data comes in stronger than expected, or if officials further reinforce a hawkish stance, Treasury yields could regain support; if data is weak and yields continue to decline, USD/JPY could face greater downward pressure.

In the near term, the interplay of Japanese policy expectations, U.S. interest rate movements, and intervention risk will remain the key to whether the pair can break out of its ranging zone.

On the 4-hour chart, USD/JPY still maintains a slightly bullish structure in the short term, with the pair currently in a consolidation range around 158.00 but still trading above the 100-period simple moving average, indicating that the prior uptrend has not been clearly broken.

The recent sideways movement is more akin to consolidation within an uptrend rather than a confirmed trend reversal.

However, dollar weakness and potential intervention risk from Japanese authorities could continue to limit buyers' willingness to enter the market.

On the downside, the first focus is around 157.59, which coincides with the 100-period simple moving average on the 4-hour chart and serves as an important dynamic support level.

If the pair can hold this area, there is still an opportunity in the short term to retest the 158.00 mark and further challenge the upper boundary of the range around 158.50.

If the price effectively breaks above 158.50 and stabilizes above it, this would help confirm that bulls have regained the initiative; conversely, if it falls below 157.59, caution is warranted regarding further declines, and the existing bullish structure would also be weakened.

USD/JPY is currently being influenced by a combination of the U.S.-Japan interest rate differential, Bank of Japan policy expectations, dollar safe-haven demand, and foreign exchange intervention risk.

Japan's wage growth supports further policy tightening, but persistently declining household spending reflects that domestic demand still faces challenges; on the U.S. side, retreating Treasury yields are weighing on the dollar, while market expectations for a December Fed rate hike still provide support.

The short-term technical structure is slightly bullish, but resistance around 158.50 and support near 157.59 will determine the next directional move.

Close attention should be paid to U.S. economic data, Fed officials' speeches, and policy signals from Japanese authorities, with caution taken to guard against rapid price fluctuations near key levels.