The Japanese general election strengthened expectations of fiscal expansion, and the yen was supported in the short term by concerns about intervention.
2026-02-10 14:18:29
The Japanese yen (JPY) rebounded from a two-week low on Tuesday during Asian trading hours after a slight dip, driven by buying interest. The Liberal Democratic Party (LDP) won a historic supermajority of 316 seats in Sunday's lower house election, providing Prime Minister Sanae Takaichi with political backing to pursue large-scale fiscal expansion.
While this outcome eliminates political uncertainty, it also exacerbates concerns about the sustainability of Japan's fiscal policy, and in the long run, it could push up government bond yields, boost the stock market, and put downward pressure on the yen.
In the short term, the yen remains supported by the risk of intervention. Japan's Finance Minister emphasized that the Japanese government reserves the right to intervene in exchange rate behavior that deviates from fundamentals.
Atsushi Mimura, a senior yen diplomat, noted that he is closely monitoring market developments, indicating that the possibility of direct intervention remains. This provides support for the yen's short-term rise, limiting the upside potential of USD/JPY.
On the other hand, the US dollar has weakened amid widespread market expectations that the Federal Reserve will cut interest rates twice this year. This diverges significantly from the Bank of Japan's hawkish policy path and supports the structural upward momentum of the yen.
Furthermore, concerns about the independence of US monetary policy and news that Chinese regulators advised financial institutions to reduce their holdings of US Treasury bonds also weakened dollar buying, further benefiting the yen. Improved market risk appetite and easing tensions in the Middle East somewhat limited yen buying during Tuesday's Asian session, but overall downward pressure remained under control.
Investors remain focused on US retail sales, non-farm payrolls, and CPI data, which will influence the dollar's performance and provide a new direction for USD/JPY.
From a technical perspective, USD/JPY is currently hovering around the key support zone of 155.60–155.50. This area, formed by the 200-hour moving average (SMA) and the 38.2% Fibonacci retracement level of the recent upward move, acts as dynamic support.
Short-term moving averages are trending upwards, suggesting that pullbacks may find support. In terms of momentum indicators, the MACD is slightly above the signal line and has a slightly positive value near the zero line, indicating limited short-term upward momentum but with some support.
The RSI is around 39, below the neutral line of 50, indicating that buying pressure remains cautious. A break below 155.50 could extend to the 50% retracement level of 154.91, where further declines will test the strength of both bulls and bears. If the price remains above the 200-hour moving average, there is still room for a short-term recovery.
Conversely, if the key support level is breached, the price may fall more rapidly and retest the support level around 154.91.
Editor's Note:
The yen's short-term performance remains influenced by both policy divergence and expectations of intervention. Expectations of fiscal expansion in Japan have increased medium- to long-term downward pressure on the yen, but central bank policy stability and potential intervention have limited short-term declines.
USD/JPY is consolidating near key moving average support. In the short term, attention should be paid to opportunities for pullbacks and stabilization; a break below support could trigger a deeper correction. Overall, the yen is currently exhibiting a pattern of both fundamental support and technical pullback, with a generally weak and range-bound trading strategy.
While this outcome eliminates political uncertainty, it also exacerbates concerns about the sustainability of Japan's fiscal policy, and in the long run, it could push up government bond yields, boost the stock market, and put downward pressure on the yen.
In the short term, the yen remains supported by the risk of intervention. Japan's Finance Minister emphasized that the Japanese government reserves the right to intervene in exchange rate behavior that deviates from fundamentals.
Atsushi Mimura, a senior yen diplomat, noted that he is closely monitoring market developments, indicating that the possibility of direct intervention remains. This provides support for the yen's short-term rise, limiting the upside potential of USD/JPY.
On the other hand, the US dollar has weakened amid widespread market expectations that the Federal Reserve will cut interest rates twice this year. This diverges significantly from the Bank of Japan's hawkish policy path and supports the structural upward momentum of the yen.
Furthermore, concerns about the independence of US monetary policy and news that Chinese regulators advised financial institutions to reduce their holdings of US Treasury bonds also weakened dollar buying, further benefiting the yen. Improved market risk appetite and easing tensions in the Middle East somewhat limited yen buying during Tuesday's Asian session, but overall downward pressure remained under control.
Investors remain focused on US retail sales, non-farm payrolls, and CPI data, which will influence the dollar's performance and provide a new direction for USD/JPY.
From a technical perspective, USD/JPY is currently hovering around the key support zone of 155.60–155.50. This area, formed by the 200-hour moving average (SMA) and the 38.2% Fibonacci retracement level of the recent upward move, acts as dynamic support.
Short-term moving averages are trending upwards, suggesting that pullbacks may find support. In terms of momentum indicators, the MACD is slightly above the signal line and has a slightly positive value near the zero line, indicating limited short-term upward momentum but with some support.
The RSI is around 39, below the neutral line of 50, indicating that buying pressure remains cautious. A break below 155.50 could extend to the 50% retracement level of 154.91, where further declines will test the strength of both bulls and bears. If the price remains above the 200-hour moving average, there is still room for a short-term recovery.
Conversely, if the key support level is breached, the price may fall more rapidly and retest the support level around 154.91.
Editor's Note:
The yen's short-term performance remains influenced by both policy divergence and expectations of intervention. Expectations of fiscal expansion in Japan have increased medium- to long-term downward pressure on the yen, but central bank policy stability and potential intervention have limited short-term declines.
USD/JPY is consolidating near key moving average support. In the short term, attention should be paid to opportunities for pullbacks and stabilization; a break below support could trigger a deeper correction. Overall, the yen is currently exhibiting a pattern of both fundamental support and technical pullback, with a generally weak and range-bound trading strategy.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
