The Japanese Yen (JPY) continues to trade with a bearish tone against a mildly stronger US Dollar (USD), hovering near its lowest level since early August during Tuesday’s Asian session. The unexpected outcome of Japan’s leadership contest has set the stage for more expansionary fiscal policies, complicating the Bank of Japan’s (BoJ) efforts to normalize monetary policy. As a result, markets are scaling back expectations for a BoJ rate hike later this month—pressuring the Yen further.
Meanwhile, broader market optimism continues to weigh on safe-haven demand for the JPY, helping the USD/JPY pair maintain intraday gains around the mid-150.00 range. Data released earlier today revealed that Japan’s Household Spending rose more than expected in August, supporting the BoJ’s cautious tightening stance. However, expectations that the US Federal Reserve (Fed) could still cut rates twice this year are limiting USD upside momentum and keeping gains in check.
Yen under pressure as Takaichi’s victory signals fiscal expansion
Japan’s Ministry of Internal Affairs reported that Household Spending rose 2.3% year-on-year in August—the fourth straight monthly increase—backing the BoJ’s view of a gradual recovery in domestic demand. Yet, the political shift following fiscal dove Sanae Takaichi’s victory in the Liberal Democratic Party (LDP) leadership election adds uncertainty. Expected to become Japan’s first female Prime Minister in mid-October, Takaichi has consistently supported large-scale government spending, a stance likely to complicate the BoJ’s monetary tightening efforts.
Her win, coupled with rising optimism for pro-growth policies, has pushed Japan’s Nikkei 225 to new record highs and weighed further on the Yen’s safe-haven appeal. At the same time, Wall Street benchmarks—the Nasdaq and S&P 500—also logged record closes on Monday, boosting global risk sentiment and reducing demand for the JPY.
US Dollar steadies amid Fed rate-cut expectations and shutdown concerns
The US Dollar regained some ground after Monday’s pullback from late-September highs, adding mild upward momentum to the USD/JPY pair. Still, bullish conviction remains limited as traders continue to bet on upcoming Fed rate cuts. According to the CME FedWatch Tool, markets now see about a 95% chance of a 25-basis-point cut in October and an 84% chance of another in December.
However, the ongoing US government shutdown, now in its sixth day, poses risks to economic activity and caps USD strength. The Senate adjourned Monday without resolving the budget impasse, as Democrats rejected the Republican spending proposal, insisting on continued healthcare subsidies.
Investors now turn their attention to Federal Reserve speakers this week, including Chair Jerome Powell’s remarks on Thursday and the FOMC meeting minutes on Wednesday, for more clarity on policy direction amid rising economic uncertainty.
USD/JPY technical outlook: Bulls stay in control above 150.00
Technically, USD/JPY’s decisive break above the 150.00 psychological mark builds on last week’s rebound from the 100-day Simple Moving Average (SMA), reinforcing the bullish bias. Momentum indicators remain positive without signaling overbought conditions, suggesting room for further upside.
A sustained move above 151.00—the August swing high—could open the door toward higher levels in the short term. On the downside, immediate support lies just below 150.00, followed by the 149.40–149.00 zone. Deeper losses may find additional demand near 148.35, ahead of 148.00–147.80, where buyers are expected to defend the trend. A break below these supports could shift short-term bias back in favor of the bears.
