The Japanese Yen (JPY) maintains a modest upside bias against a slightly weaker US Dollar (USD) during Tuesday’s Asian session, supported by renewed speculation over possible joint currency intervention by Japan and the United States. Comments from Japan’s Finance Minister Satsuki Katayama reignited such concerns, while expectations of a more hawkish Bank of Japan (BoJ) further underpin the JPY. As a result, USD/JPY has retreated from the more-than-one-week high posted on Monday.
That said, the Yen’s upside remains limited amid domestic political uncertainty ahead of the February 8 snap election and lingering fiscal concerns linked to Prime Minister Sanae Takaichi’s reflationary agenda. In addition, a generally positive tone in global equity markets weighs on demand for the safe-haven JPY. Meanwhile, the nomination of Kevin Warsh as the next Federal Reserve Chair provides support to the USD, helping cap deeper losses in the USD/JPY pair.
Katayama’s remarks revive intervention concerns, supporting the Yen
Finance Minister Satsuki Katayama stated on Tuesday that Japan will continue to closely coordinate with US authorities when necessary, in line with a joint statement issued by both countries last September, and will respond appropriately to currency moves.
She also defended Prime Minister Takaichi’s earlier comments highlighting the broader economic benefits of a weaker Yen, clarifying that the remarks were made in general terms rather than as a policy signal.
Meanwhile, the Summary of Opinions from the BoJ’s January meeting revealed that policymakers discussed growing inflationary pressures stemming from Yen weakness, reflecting a relatively hawkish tone among board members.
On the political front, Prime Minister Takaichi has pledged to suspend the consumption tax on food for two years if her Liberal Democratic Party wins the upcoming snap election. This proposal has fueled concerns over Japan’s fiscal health and continues to limit aggressive Yen buying.
Globally, improved risk sentiment is also weighing on the JPY. US President Donald Trump announced that the US and India have reached a trade agreement and will move swiftly to reduce mutual tariffs, boosting investor confidence. In addition, signs of easing tensions between the US and Iran over Tehran’s nuclear program have reduced geopolitical risk premiums, further dampening demand for traditional safe-haven assets.
On the US side, Trump’s nomination of Kevin Warsh to replace Jerome Powell as Federal Reserve Chair in May, subject to Senate approval, has lent support to the USD. Warsh is widely viewed as an inflation hawk, suggesting a vigilant stance if price pressures re-emerge.
Adding to USD strength, the latest Institute for Supply Management data showed US manufacturing activity expanded for the first time in a year, with the Manufacturing PMI jumping to 52.6 in January from 47.9 previously. This sharp improvement has helped the US Dollar retain much of its recent rebound from last week’s four-year low, limiting downside pressure on USD/JPY.
With no major US economic releases scheduled for Tuesday, the pair is likely to take cues from broader risk sentiment and policy-related headlines. Given the mixed fundamental backdrop, traders may remain cautious before committing to fresh directional positions in USD/JPY.
