**USD/JPY trades near 158 in early October 2026 amid a persistent policy-rate gap favoring the dollar.** The Federal Reserve’s hawkish stance—pricing additional hikes with the funds rate near 3.75–4.00% and 10-year Treasury yields above 5%—contrasts with the Bank of Japan’s more gradual normalization after its September lift to 1.25%. This differential, currently around 250–360 basis points, underpins dollar demand and limits yen appreciation despite Tokyo core inflation exceeding 2%. Japanese authorities have signaled readiness for further intervention near 160, capping rallies while recent BoJ communications tempered near-term hike expectations. Key upcoming releases, including U.S. CPI, nonfarm payrolls, and the late-October FOMC meeting, will shape near-term positioning and the likelihood of testing higher thresholds before year-end.