USD/JPY approaches 157.00 as Yen struggles ahead of the elections
Oleh Guillermo Alcala
Tarikh Diterbitkan: 4 Feb 2026 | Tarikh Diubah: 4 Feb 2026
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The Japanese Yen (JPY) became the worst-performing currency of the G8 on Wednesday.
- USD/JPY rallies to 156.80, appreciating nearly 3% from last week's lows.
- Investors are dumping the JPY ahead of this weekend's elections.
- The Greenback remains steady, awaiting US services activity and employment figures.
The Japanese Yen (JPY) became the worst-performing currency of the G8 on Wednesday. JPY weakness has boosted the USD/JPY pair, which is trading above 156.80 at the time of writing, on track to a 3% rally from last week’s lows.
Investors are selling the Yen across the board heading into this weekend’s snap elections. Prime Minister Takaichi’s increasing popularity has triggered concerns that she will come from the polls with a stronger parliamentary support to extend her tax cut and large stimulus program, leading to a fiscal crisis.
Markets shrug off intervention fears
Tokyo authorities have warned about a potential intervention to stem excessive Yen volatility, but Takaichi’s comments praising the benefits of a soft Yen and the US Treasury Secretary’s denial of a coordinated plan to support JPY stability have sent the Yen tumbling across the board.
The Greenback, however, is not particularly strong on Wednesday. Investors are still celebrating the nomination of Kevin Warsh as the next Fed Chairman, and the end of a two-day partial government shutdown has provided additional support to the US Dollar Index (DXY), but the last few days’ rally seems to have stalled.
Traders are awaiting the release of US Services activity data, due later on Wednesday, and the ADP Employment Change report. Private-sector jobs are expected to show a moderate improvement. ADP data may be particularly relevant, as the government shutdown has delayed Friday’s US Nonfarm payrolls report.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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