Monetary policy divergence between the Federal Reserve and Bank of Japan remains the dominant driver of USD/JPY sentiment, with traders pricing in gradual BOJ normalization against a potentially steadier or higher-for-longer Fed stance through year-end 2026. The closely bunched implied probabilities across the 140–170 range reflect ongoing uncertainty around the pace of any further BOJ hikes, U.S. inflation trajectory, and growth differentials, all of which influence the interest-rate gap that historically anchors the pair. Recent Treasury yield movements and yen intervention signals have added short-term volatility without shifting the medium-term distribution decisively, while risk sentiment and safe-haven flows provide secondary support for the yen in stressed scenarios. Key upcoming catalysts include FOMC and BOJ policy meetings plus fresh CPI and growth data that could alter rate expectations and tighten or widen the current 140–170 trading range.