USD/JPY Crashes Below 147.50 as Weak U.S. Data Fuels Recession Fears
Markets Rattled as Bond Yields Plunge and Traders Rethink Fed’s Path
The USD/JPY currency pair (U.S. Dollar to Japanese Yen) plummeted more than 2% today, falling below the psychological 147.50 level, as a wave of disappointing U.S. economic data triggered a sharp reassessment of the Federal Reserve’s monetary policy outlook.
At the time of writing, USD/JPY was trading near 147.00, down from recent highs above 150 earlier this week. The move was driven by a steep decline in U.S. Treasury yields and a surge in demand for safe-haven assets like the Japanese Yen.
Markets reacted violently after both ISM Manufacturing and ISM Prices Paid reports came in well below expectations. The ISM Manufacturing PMI fell to 46.4, significantly lower than the forecasted 48.0, signaling deeper contraction in the U.S. industrial sector. Meanwhile, ISM Prices Paid dropped to 52.5, suggesting easing inflationary pressures and adding to speculation that the Fed’s tightening cycle is nearing an end.
The 10-year U.S. Treasury yield plunged below 4.15% following the release of the data, reflecting a massive flight to quality and reinforcing market bets that interest rate cuts may arrive sooner than previously thought.
Currency traders quickly shifted their positions, favoring the Yen over the Dollar, which has lost some of its recent bullish momentum. The Japanese Yen, considered a traditional safe-haven currency, rallied across the board, not just against the Dollar, but also versus other major currencies.
This week’s decline in USD/JPY marks one of the sharpest single-day moves in recent months and signals that currency markets are growing increasingly sensitive to economic indicators and the shifting narrative surrounding the Fed’s next moves.
Some analysts believe that today’s data could be a turning point for the Dollar. “The market is no longer buying the higher-for-longer narrative,” said one strategist, “and if more data confirms this trend, we may see USD/JPY push toward 145 in the coming days.”
While some Fed officials have maintained a hawkish tone, the incoming data may force a reassessment. Futures markets are now pricing in a higher probability of a rate cut as early as Q1 2026, with the likelihood increasing if next week’s Non-Farm Payrolls or CPI data show additional signs of slowing momentum.
For traders and investors, today’s sharp drop in USD/JPY could signal a broader shift in sentiment, not only for currency pairs but also across equities and commodities that are heavily influenced by U.S. monetary policy expectations.