The Japanese yen is likely to extend its losses against the U.S. dollar this week. This trend is primarily driven by two factors: a more resilient U.S. dollar and weekend comments from Japanese Prime Minister Takaichi that have led traders to believe direct intervention to support the yen is becoming less probable. When addressing currency issues over the weekend, Takaichi first emphasized the benefits of a weak yen for exports, stating it "presents a significant opportunity for export-oriented sectors and offers a buffer for the automotive industry against U.S. tariffs," before adopting a more restrained tone. She expressed a desire to "build a robust economic structure resilient to exchange rate fluctuations." Market participants interpreted these remarks as lacking a strong signal to defend the currency, potentially even raising the bar for official direct support. This has objectively weakened the impact of previous "verbal intervention" aimed at curbing the yen's depreciation. Traders widely believe this suggests a higher threshold for authorities to implement potential supportive measures. Following Takaichi's comments, the yen fell further on Monday, dropping as much as 0.5% to 155.51 against the dollar.
Converging policy signals from the U.S. and Japan have re-exposed the yen to fundamental pressures. Beyond the cautious stance from Japan, the U.S. position has also failed to offer support for the yen. U.S. Treasury Secretary Beshent explicitly stated last week that the U.S. prefers a strong dollar and, more importantly, that the U.S. government has not taken any action to bolster the yen. Simultaneously, data released by Japan's Ministry of Finance on Friday showed no official foreign exchange intervention had been conducted as of January 28, further dampening market expectations for policy-backed support. Without this policy protection, the yen is once again exposed to its long-term structural pressures, including negative real interest rates and the expansionary fiscal policy stance maintained by Takaichi.
With elections approaching, market focus returns to the question of "where is the bottom line." Analysis suggests that with the USD/JPY pair still having significant room before reaching the widely watched 160 level—considered a potential trigger for intervention—the likelihood of the yen continuing its depreciation trend before the Japanese general election is rising, given the absence of policy resistance. Policy and political signals from both sides of the Pacific point to a common conclusion: in the short term, neither the U.S. nor Japanese governments are likely to provide clear support for the yen. In recent periods, expectations of official intervention have repeatedly been a key factor in preventing the yen from falling to multi-year lows.
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