The Japanese Yen (JPY) trims a part of Asian session losses on Wednesday and remains close to a nearly three-month high, set against its American counterpart the previous day. Minutes from the Bank of Japan’s (BoJ) December meeting showed that members agreed on the need to continue raising interest rates. This marks a significant divergence in comparison to bets that the US Federal Reserve (Fed) would lower borrowing costs two more times in 2026 and acts as a tailwind for the lower-yielding JPY.
Adding to this, speculations that authorities would intervene to stem further JPY weakness underpin the JPY. However, concerns about Japan’s fiscal health, along with domestic political uncertainty ahead of a snap election on February 8 and a positive risk tone, could cap any meaningful JPY appreciation. Furthermore, a goodish US Dollar (USD) recovery from a four-year low might continue to offer some support to the USD/JPY pair as traders keenly await the crucial FOMC rate decision, due later today.
Japanese Yen bears seem hesitant amid divergent BoJ-Fed policy outlooks
- Minutes of the Bank of Japan’s December policy meeting, released this Wednesday, showed that the board judged the economy to be recovering moderately, albeit with pockets of weakness. The minutes further revealed that policymakers were becoming more confident that Japan is sustaining a moderate wage–price cycle, and were using that assessment to justify another step toward less accommodative policy.
- The remarks highlighted the central bank’s readiness to continue pushing up still-low borrowing costs. A few board members, however, said the central bank must be mindful of the impact a weak Japanese Yen could have on underlying inflation in deciding when to raise interest rates again. This, along with nervousness over Japan’s fiscal outlook and political uncertainty, prompts some selling around the JPY.
- Japan’s Prime Minister Sanae Takaichi pledged to abolish sales tax on food items for two years as part of her campaign ahead of a snap lower house election on February 8. Given that Japan’s gross government debt has exceeded 200% of GDP for the past 15 years, Takaichi’s spending and tax cut plans fueled concerns about a deterioration in Japan’s public finances. This further drags the JPY lower on Wednesday.
- The US Dollar, on the other hand, stages a goodish recovery from a four-year low, touched on Tuesday, as bears opt to lighten their bets ahead of the highly-anticipated Federal Reserve rate decision later today. The focus, however, will be on the post-meeting press conference, where comments from Fed Chair Jerome Powell will be scrutinized for cues about the rate-cut path and influence the USD demand.
- Nevertheless, traders are still pricing in the possibility that the US central bank would lower borrowing costs two more times in 2026. Adding to this, concerns over the Fed’s independence, along with heightened economic and policy risk linked to US President Donald Trump’s trade and geopolitical decisions, should cap gains for the USD and the USD/JPY pair amid the divergent BoJ-Fed outlooks.
USD/JPY seems vulnerable while below 100-day SMA
The overnight sustained breakdown through the 100-day Simple Moving Average (SMA) and a close below the 154.00 mark was seen as a fresh trigger for the USD/JPY bears. Spot prices hold beneath the said support levels, keeping the near-term tone heavy despite the broader uptrend. The Moving Average Convergence Divergence (MACD) line stands below the Signal line and under the zero mark, with a widening negative histogram that reinforces bearish momentum.
The Relative Strength Index (RSI) prints at 30.94 (oversold), which could allow for a pause or a corrective bounce. Measured from the 140.12 low to the 159.19 high, the 38.2% retracement at 151.91 offers initial support, and a break lower would extend the slide.
Should downside persist, the pullback would open the 50.0% retracement at 149.66 as the next support layer within the broader advance. A contraction in the MACD’s negative histogram and a bullish crossover would soften the bearish bias, while an RSI recovery above 30 would corroborate stabilizing momentum. Reclaiming levels above the rising 100-day SMA would ease pressure and shift focus back to upside retracements in the sequence.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen Price Last 7 Days
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies last 7 days. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -2.20% | -2.61% | -3.53% | -1.69% | -3.65% | -3.05% | -3.04% | |
| EUR | 2.20% | -0.41% | -1.32% | 0.53% | -1.48% | -0.86% | -0.86% | |
| GBP | 2.61% | 0.41% | -0.91% | 0.95% | -1.07% | -0.45% | -0.45% | |
| JPY | 3.53% | 1.32% | 0.91% | 1.91% | -0.13% | 0.48% | 0.50% | |
| CAD | 1.69% | -0.53% | -0.95% | -1.91% | -2.00% | -1.39% | -1.38% | |
| AUD | 3.65% | 1.48% | 1.07% | 0.13% | 2.00% | 0.63% | 0.63% | |
| NZD | 3.05% | 0.86% | 0.45% | -0.48% | 1.39% | -0.63% | 0.00% | |
| CHF | 3.04% | 0.86% | 0.45% | -0.50% | 1.38% | -0.63% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
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