The Japanese yen (JPY) fell sharply on Tuesday, sliding to its lowest level since early August as markets reassessed expectations for a Bank of Japan (BoJ) rate hike. The currency traded near 151.00 per dollar, pressured by a firmer U.S. dollar (USD) and Japan’s evolving political landscape.
The decline followed the election of Sanae Takaichi as leader of Japan’s ruling Liberal Democratic Party (LDP), a result that positions her to become Japan’s first female prime minister. Known for her fiscally dovish stance, Takaichi supports increased public spending—raising doubts about the BoJ’s ability to tighten monetary policy further.
Traders have largely priced out a near-term rate hike, pushing the yen lower across the board. Meanwhile, upbeat global equity markets, buoyed by optimism in the artificial intelligence (AI) sector, have reduced safe-haven demand for the yen.
Still, Japan’s Household Spending data offered a counterpoint. Figures released by the Ministry of Internal Affairs showed spending rose 2.3% year-over-year in August, the fourth straight monthly gain—supporting arguments for gradual BoJ tightening.
Stronger Dollar and Political Factors in Focus
The U.S. dollar strengthened broadly in early European trading, adding to the yen’s weakness. The USD/JPY pair climbed above the psychological 150.00 level, marking a two-week high as traders favored the dollar amid relative policy divergence between the Federal Reserve and BoJ.
However, Fed rate expectations remain dovish. According to the CME FedWatch Tool, markets now assign a 95% chance of a 25-basis-point rate cut in October and an 84% probability of another in December.
Meanwhile, the ongoing U.S. government shutdown—now entering its sixth day—has injected uncertainty into the economic outlook, capping the dollar’s upside potential.
Key factors driving USD/JPY:
- Takaichi’s election boosts expectations for fiscal stimulus
- Traders unwind BoJ rate hike bets for October
- Dollar gains capped by dovish Fed and U.S. shutdown concerns
Technical View: Bulls Eye 151.00 Resistance
From a technical perspective, USD/JPY’s breakout above 150.00 reinforces a bullish bias. The pair’s rebound from its 100-day Simple Moving Average (SMA) last week suggests momentum remains on the upside.
With daily chart oscillators holding in positive territory, analysts see the path of least resistance continuing higher. A sustained move above 151.00 could open the door for further near-term gains toward 152.00.
On the downside, initial support lies near 149.40, followed by stronger support at 149.00. A break below 148.35 would signal a shift toward a short-term bearish trend.
For now, the yen remains under pressure, with political uncertainty, dovish policy expectations, and global risk appetite all weighing on its outlook.