USD/JPY posts modest losses below 152.00 as US government shutdown continues

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The USD/JPY pair trades with mild losses near 151.90, snapping the three-day winning streak during the early Asian session on Thursday. The concerns over the US-China trade front and the ongoing US federal government shutdown weigh on the US Dollar (USD) against the Japanese Yen (JPY).

USD/JPY softens around 151.90 in Thursday’s early Asian session.
Shutdown has entered its fourth week as the US Senate prepares another vote.
Concerns over new Prime Minister Sanae Takaichi's large fiscal stimulus plans might cap the JPY’s upside.

The US government shutdown has entered its fourth week with no resolution in sight. The Senate is expected to vote again on a funding bill, though it's likely to fail. This marks the second-longest government shutdown in US history.

The release of key US economic data from the Bureau of Labor Statistics and the Census Bureau is suspended, complicating decision-making for the Federal Reserve (Fed). However, the Fed is anticipated to lower its key interest rate by 25 basis points (bps) on October 29 and again in December. This, in turn, undermines the Greenback against the JPY.

Reuters reported on Wednesday that Japan's new Prime Minister Sanae Takaichi is preparing a fresh economic stimulus package that is likely to exceed last year's $92 billion to help households tackle inflation. Traders expect expansionary fiscal policy and a testy relationship with Japan's central bank would weigh on the currency.

(This story was corrected on October 23 at 01:45 GMT to say, in the title, that USD/JPY posts modest losses below 152.00 as US government shutdown continues, not 192.00)

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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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