• The Japanese Yen struggles to recover as Prime Minister Sanae Takaichi unveils her cabinet.
• The appointment of Finance Minister Satsuki Katayama, who favors a stronger JPY, provides limited relief.
• Broader USD strength, supported by easing risk aversion and Fed expectations, keeps USD/JPY elevated.

USD/JPY trades around 151.90 on Tuesday, up 0.80% for the day at the time of writing, as investors react to the confirmation of Japan’s new government and the unveiling of its cabinet. Prime Minister Sanae Takaichi, officially elected with 237 votes in the Lower House, appointed Satsuki Katayama as Finance Minister, a choice that contrasts with expectations of a purely expansionary agenda. Katayama, a former finance ministry bureaucrat, has previously expressed concerns about excessive Japanese Yen (JPY) weakness and stated that Japan’s fundamentals justify an exchange rate closer to 120–130 per US Dollar (USD).

Investors remain cautious amid uncertainty over the government’s capacity to pass major economic reforms, given that Takaichi’s coalition still falls short of a simple parliamentary majority. According to a Commerzbank analyst, the new administration may pursue a business-friendly orientation but is unlikely to favor a weaker JPY in the long term, suggesting limited scope for additional currency depreciation. “The new government is unlikely to support a depreciation of the Japanese yen, which means we continue to expect USD/JPY trending sideways", noted the analyst.

Meanwhile, the US Dollar remains broadly supported by improving market sentiment as hopes grow that the upcoming meeting between US President Donald Trump and Chinese President Xi Jinping could ease trade tensions. The White House’s economic advisor, Kevin Hassett, also reinforced optimism, stating on Monday that the ongoing US government shutdown could end this week.

However, dovish expectations for the Federal Reserve (Fed) continue to act as a moderate headwind for the Greenback. The CME FedWatch tool indicates that markets are fully pricing in a 25-basis-point interest rate cut in both October and December monetary policy meetings, limiting USD upside potential.