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The USD/JPY pair struggles to capitalize on the previous day's bounce from the 155.65 area, or a one-week low, and meets with a fresh supply during the Asian session on Thursday. Spot prices drop to the 156.00 mark in the last hour and seem poised to prolong a one-week-old retracement slide from the highest level since mid-January, touched last week.

The Japanese Yen (JPY) draws some support from speculations that authorities would step in to stem further weakness in the domestic currency and a relatively hawkish Bank of Japan (BoJ) outlook. In fact, Reuters reported on Wednesday that the BoJ is preparing markets for a possible interest rate hike as soon as next month. This, along with a broadly weaker US Dollar (USD), is seen exerting some downward pressure on the USD/JPY pair.

Investors now seem convinced that the US Federal Reserve (Fed) will lower borrowing costs again at its December meeting. The expectations were reaffirmed by the US Producer Price Index (PPI) on Tuesday, which pointed to signs of cooling inflation. This, to a larger extent, offsets a mixed set of economic indicators released this week and keeps the USD depressed near a one-week low and further contributes to the offered tone surrounding the USD/JPY pair.

However, the prevalent risk-on environment and concerns about Japan's worsening fiscal position, amid Prime Minister Sanae Takaichi’s pro-stimulus stance, could act as a headwind for the safe-haven JPY. Traders might also refrain from placing fresh directional bets around the USD/JPY pair amid relatively thin trading volumes on the back of the Thanksgiving Day holiday in the US. Nevertheless, the fundamental backdrop seems tilted in favor of bearish traders.

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