Market conditions for the Japanese Yen are currently fragile, facing downward pressure due to a combination of factors including a potentially deteriorating fiscal outlook, upcoming Bank of Japan policy decisions, and political uncertainty surrounding a snap election. The Yen is struggling despite positive export data. Traders remain vigilant about potential intervention.
- The Japanese Yen slipped past 158.5 per dollar.
- Prime Minister Sanae Takaichi called a snap election and proposed looser fiscal measures, including eliminating the 8% sales tax on food.
- The BOJ is widely expected to hold its policy rate steady at 0.75% following December’s rate hike.
- Traders are alert to potential yen intervention due to concerns about the impact of a weaker currency on domestic inflation.
- Japan’s exports rose for a fourth consecutive month in December to a record level.
- Full-year exports also increased in 2025, even as shipments to the US fell.
- USD/JPY tested one-week highs, at 158.87.
- An ambiguous stance by BoJ Governor Ueda regarding further monetary tightening is likely to send the Yen on a tailspin.
The confluence of political decisions, fiscal concerns, and central bank policy expectations paints a complicated picture for the Yen. While export figures indicate some strength in the Japanese economy, the overall sentiment suggests vulnerability. A focus on fiscal easing and the potential for unchanged monetary policy could continue to weigh on the currency.