Yen Caught Between BoJ Caution and Shifting Carry Trade. Forecast as of 06.10.2026

The wide yield spread between the US and Japan, driven by the Fed and the Bank of Japan moving at the same pace, is pushing the USD/JPY higher. However, the pair isn’t rising as quickly as it otherwise might, thanks to an unexpected ally for the yen: the euro. Let’s analyze this situation and develop a trading plan.Major Takeaways The Bank of Japan is in no hurry to raise interest rates. Speculators are closing their long positions on the yen. The euro is being used as a funding curr