Recent Fed and Bank of Japan policy moves anchor USD/JPY trader sentiment for year-end 2026. The Federal Reserve’s September 25-basis-point hike to the 3.75–4.00% range, coupled with dot-plot signals for at least one additional increase this year, has reinforced the dollar’s yield advantage. Markets now price the BoJ to lift its policy rate to 1.25% imminently, yet the resulting U.S.–Japan rate differential remains wide, supporting the pair near 155–156. With roughly three months until year-end, implied probabilities cluster in the 150–160 and 160–170 buckets, reflecting expectations of range-bound trading amid sticky U.S. inflation, measured BoJ normalization, and limited scope for sharp yen appreciation absent faster Japanese tightening or softer U.S. data. Elevated Treasury yields continue to cap downside risks while capping aggressive upside absent further Fed hawkishness.