USD/JPY rebounds above 146.50 as Fed cuts rate for first time this year

• USD/JPY gains ground to near 146.80 in Thursday's early Asian session.
• Fed officials lowered their benchmark interest rate by a quarter percentage point and penciled in two more reductions this year.
• The BoJ is expected to leave interest rates unchanged on Friday. 

The USD/JPY pair recovers some lost ground around 146.80 during the early Asian session on Thursday. The US Dollar (USD) bounces off the six-week lows near the 146.00 neighborhood after the Federal Reserve (Fed) cut interest rates by a quarter of a percentage point.

The Fed decided to cut its benchmark interest rate at its September meeting on Wednesday, the first time since December, and signaled more reductions are likely this year. Fed Chair Jerome Powell pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates after holding them steady since December amid concerns over tariff-driven inflation. Powell also emphasized ongoing concern over inflation pressures resulting from tariffs.

The Greenback receives some support, as Powell said the US central bank is in a "meeting-by-meeting situation" regarding the outlook for interest rates and characterized Wednesday's move as a risk management cut. Powell further stated that he does not feel the need to move quickly on rates.

Japanese Prime Minister Shigeru Ishiba's resignation added a layer of uncertainty in the markets and could fuel uncertainty over the likely timing and the pace of interest rate hikes by the Bank of Japan (BoJ). This, in turn, could undermine the Japanese Yen (JPY) and act as a tailwind for the pair.

The BoJ is expected to keep interest rates steady on Friday. Markets are looking to BoJ Governor Kazuo Ueda's post-meeting press conference for signals on when the BoJ will begin rate hikes, which have been paused since January while officials assess the impact of tariffs. Any hawkish remarks from BoJ policymakers could lift the JPY in the near term.