The USD/JPY has dropped to about 153.65 in early Asian trading because of worries about a US government shutdown. The Senate’s inability to pass a funding bill could lead to the longest federal funding gap in US history. This deadlock has resulted in a Republican-supported temporary bill failing in the Senate for the 14th time. There are no new votes scheduled, increasing concerns about a long shutdown that may weaken the US Dollar short-term. The Japanese authorities might step in to support the JPY, especially after comments from Japan’s Finance Minister stressed the need for stable currency movements. However, uncertainty about the Bank of Japan’s next interest rate hike is limiting the JPY’s rise. Market watchers are paying close attention to key upcoming data, including the ADP Employment Change and the US ISM Services PMI for October. Traders are also curious about the economic policies of Japan’s new Prime Minister. The Japanese Yen’s performance is impacted by the Bank of Japan’s policies, differences in bond yields with the US, and overall market sentiment. The Yen often acts as a safe-haven currency, gaining strength during market stress. As USD/JPY trades around 153.50, the main factor is the US government shutdown. This situation brings uncertainty for the US dollar, indicating a bearish outlook for the currency in the near term. Derivative traders should prepare for increased volatility as long as the political impasse continues. Looking back, the 35-day shutdown from late 2018 to early 2019 resulted in a drop of over 1% for the US Dollar Index (DXY). With the current shutdown possibly becoming the longest ever, we might see similar or greater selling pressure on the dollar. Buying put options on USD/JPY could be a smart way to hedge against or bet on further dollar weakness. The possibility of intervention from Japanese officials adds more downward pressure to this currency pair. We recall the interventions from September and October 2022, which happened at lower levels than today’s. With the pair above 153.00 now, the likelihood of officials intervening to strengthen the yen is very high, supporting bearish positions. Yet, we must also consider the Bank of Japan’s cautious stance on monetary policy, which may limit the yen’s strength. Japan’s core inflation was at 2.8% year-over-year in the latest September 2025 data, but it hasn’t compelled the central bank to adopt a hawkish approach yet. This uncertainty from the BoJ complicates the typical response to the shutdown, making directional bets risky. With these competing forces, volatility is expected to dominate in the coming weeks. We predict sharp, unpredictable movements rather than a steady trend. Options strategies that benefit from major price swings, such as long straddles or strangles, might work well in this environment. In the short term, upcoming US data like the ISM Services PMI will be vital. If the report is weak, it could raise concerns about the economic effects of the shutdown, likely driving USD/JPY lower. On the other hand, a stronger-than-expected report could lead to a temporary bounce, making it important to have strategies ready for movement in either direction.

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