The USD/JPY pair continued its decline during Asian trading hours, trading around 153.50, marking its second consecutive day of losses. The yen has recently strengthened, driven by global risk aversion.

Global risk assets experienced a sharp decline, market concerns about the high valuations of artificial intelligence intensified, and CEOs of major Wall Street banks warned of potential market correction risks, further fueling risk aversion.

Furthermore, the yen received policy support. Japanese Finance Minister Satsuki Katayama reiterated that the government is closely monitoring foreign exchange fluctuations and warned against unilateral and sharp exchange rate swings.

Prime Minister Sanae Takaichi stated that Japan has not yet achieved sustainable inflation supported by wage growth, suggesting a cautious stance on further interest rate hikes. This policy statement increased market confidence in the yen's support, limiting the upside potential of the USD/JPY exchange rate.

The US dollar retreated after five consecutive days of gains. The US government shutdown has entered its sixth week and is poised to become the longest shutdown in history. The Senate again failed to pass a Republican-backed short-term funding bill, marking its 14th failure.

The fiscal impasse has increased uncertainty surrounding the US dollar, putting it under short-term pressure. Federal Reserve policy continues to provide some support for the dollar. Chairman Jerome Powell stated after last week's meeting that further rate cuts in December remain uncertain, and policymakers may adopt a wait-and-see approach, awaiting new official data releases.

Overall, USD/JPY is under short-term pressure, but the impact of global risk sentiment and policy developments on the exchange rate still needs to be monitored.

Editor's Note:

The recent USD/JPY exchange rate has exhibited a pattern of "strong support from the safe-haven yen and drag on the US dollar due to the fiscal impasse." The decline in global risk assets and Japanese policy statements have strengthened the yen, putting significant downward pressure on it; while the US dollar has retreated in the short term, the Federal Reserve's cautious policy stance provides some bottom support.

If global risk sentiment intensifies further or Japanese policy rhetoric strengthens, USD/JPY may continue to decline; conversely, if US economic data improves or the dollar regains support, a rebound is possible. Close attention should be paid to macroeconomic and policy developments.