• USD/JPY has firmly crossed the immediate hurdle of 136.60 as DXY advances.
• The Fed will continue its path of hiking interest rates at a higher pace.
• For shifting to a neutral stance, the BOJ also needs to step up its wage rate along with price pressures.

The USD/JPY pair has delivered an upside break of the consolidation formed in a narrow range of 136.40-136.56 in the Tokyo session. The asset has extended its gains after overstepping the immediate hurdle of 136.60 as investors are shifting back behind the US dollar index (DXY) ahead of the Jackson Hole Economic Symposium.

The market participants are turning risk-averse amid uncertainty over the commentaries from global think-tank leaders at Jackson Hole. The stoplight will remain at Federal Reserve (Fed) chair Jerome Powell as investors will get realistic cues above the likely monetary policy action by the Fed in its September monetary policy meeting.

Most probably, the Fed will stick to its aggressive rate hikes strategy as the inflation rate is still above the whooping figure of 8%. No doubt, Fed policymakers are having evidence of near exhaustion in the price pressures but the entire inflation mess is needed to fix sooner. Therefore, more rate hikes will be discussed at the price of a further slowdown in the economic activities in the US. Well, these are the consequences, that investors have to go through due to delayed response by the Fed on ramping up inflationary pressures.

On the Tokyo front, the Japanese yen is set for a further slide broadly as the Bank of Japan (BOJ) will stick to its prudent policy even if inflation hits 3%. BOJ’s prudent stance is not only from the subdued inflation rate but also due to the stagnant labor cost index. As Japan’s economy is failing to elevate the wage rate, a neutral stance by the BOJ may accelerate troubles for the economy.