Japanese Yen preserves modest recovery gains as intervention warning counter fiscal woes

• Japanese Yen refreshes a two-week low as Takaichi’s landslide win revives fiscal concerns.
• Intervention warning prompts some intraday JPY short covering amid the USD weakness.
• A fall in Japan’s real wages tempers bets for an immediate BoJ rate hike and caps the JPY.

The Japanese Yen (JPY) sticks to its recovery gains through the Asian session on Monday as Japan’s Finance Minister Satsuki Katayama stepped up intervention warnings and confirmed close coordination with the US against disorderly FX moves. This, along with some follow-through US Dollar (USD) selling, triggers an intraday USD/JPY turnaround from the 157.65 region, or over a two-week top, touched in reaction to Prime Minister Sanae Takaichi’s landslide win in Sunday’s election.

The outcome paves the way for further fiscal stimulus and fuels concern about Japan’s high public debt levels. Moreover, data released earlier today showed that Japan’s real wages shrank in December for a 12th straight month as nominal pay growth slightly undershot slowing consumer inflation. This keeps pressure on the Bank of Japan (BoJ) to move cautiously after raising rates to a three-decade high in December. Apart from this, the upbeat market mood caps the safe-haven JPY.

Japanese Yen bears remain on the sidelines amid intervention fears

• Japanese Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) sailed past the 233 seats needed for a majority in the lower house, marking a landmark victory in Sunday’s election. The outcome, in turn, paves the way for promised tax cuts and a stronger defence system, shifting focus squarely to Japan’s already strained public finances.
• Japan’s Finance Minister Satsuki Katayama said that she will communicate with markets on Monday if needed to stabilize the Japanese Yen. Katayama reiterated that she was keeping in close contact with US Treasury Secretary Scott Bessent and stressed that Japan retains the right to intervene against moves that deviate from fundamentals.
• Japan Chief Cabinet Secretary Minoru Kihara said on Monday that he is concerned over one-sided foreign exchange (FX) moves. Meanwhile, top currency diplomat Atsushi Mimura stated that he will closely watching foreign exchange moves with a high sense of urgency, providing a goodish lift to the Japanese Yen at the start of a new week.
• The Labour ministry reported this Monday that Japan’s nominal wages rose 2.4% YoY in December 2025, up from a revised 1.7% gain in the previous month. The reading, however, fell short of market expectations. Moreover, inflation-adjusted real wages fell 0.1% in December from a year ago, marking the 12th straight month of contraction.
• The data temper bets for an immediate rate hike by the Bank of Japan as policymakers have indicated that further monetary tightening will depend on sustained, broad-based wage gains. This, along with the prevalent upbeat mood across the global equity markets, keeps a lid on the JPY’s intraday recovery from over a two-week trough.
• Indirect talks between the US and Iran on the future of the latter’s nuclear program ended on Friday with a broad agreement to maintain a diplomatic path. This helps ease concerns about a military confrontation in the Middle East and boosts investors’ appetite for riskier assets at the start of a new week, despite the latest US sanctions on Iran.
• The US Dollar attracts some sellers for the second straight day amid bets that the Federal Reserve will lower borrowing costs two more times in 2026. This marks a significant divergence in comparison to expectations that the BoJ will stick to its policy normalization path and caps the upside for the USD/JPY pair, warranting caution for bulls.
• The market focus now shifts to this week’s release of the closely-watched US monthly jobs data – popularly known as the Nonfarm Payrolls (NFP) report on Wednesday. Apart from this, the latest US consumer inflation figures on Friday will drive the USD and provide a fresh impetus to the USD/JPY pair during the latter half of the week.

USD/JPY awaits acceptance below 100-hour SMA before the next leg down

The USD/JPY pair shows some resilience at the 100-hour Simple Moving Average (SMA) and stalls its intraday retracement slide near the 156.20 region. The latter should now act as a key pivotal point for intraday traders. The Moving Average Convergence Divergence (MACD) shows a bearish crossover near the zero line as momentum turns negative, hinting at building downside pressure. The Relative Strength Index (RSI) sits at 46, below the 50 midline, reflecting subdued momentum.

Meanwhile, the USD/JPY pair holds above the 100-hour SMA, currently pegged around the 156.55-156.50 region, keeping the near-term bias tilted upward and offering nearby dynamic support. A recovery in MACD back above the zero line and an RSI push through 50 would improve the tone and could pave the way for continuation. Conversely, a decisive close beneath the average would weaken the setup and open room for a deeper pullback.