USD/JPY slipped to around 153.15 in early European trading on Wednesday, with the yen strengthening past 153.00. The move followed the general election. Demand for the yen rose as money flowed into Japanese equities.
Japan’s Nikkei 225 closed at a record high for the third day in a row on Wednesday. Foreign investors bought more Japanese shares, which increased yen demand and pushed USD/JPY lower.
Fiscal Optimism And Market Focus
Traders are also pricing in expectations that Japan’s PM, Takaichi, may take a more fiscally disciplined approach. Attention now turns to the US January jobs report, due later on Wednesday.
The release was delayed slightly after a four-day US government shutdown. Nonfarm Payrolls are expected to rise by 70K in January, after a 50K gain in December.
The Unemployment Rate is expected to hold at 4.4%. Average Hourly Earnings are forecast to slow to 3.6% from 3.8%.
Moves in the yen often track Bank of Japan policy, Japan–US yield spreads, and shifts in risk appetite. The BoJ’s ultra-loose stance from 2013 to 2024 weighed on the yen. The shift away from that policy in 2024 has supported the currency.
Positioning For Jobs Data Volatility
The Japanese yen has strong momentum, helped by fiscal optimism and steady equity inflows. Ministry of Finance data showed foreign investors were net buyers of Japanese equities for a fifth straight week. They bought more than ¥800 billion, helping lift the Nikkei 225 to new highs. This yen support may last as long as the positive mood continues.
The key risk today is the US jobs report, which could trigger sharp price swings. With consensus at just 70K—and with many 2025 reports coming in above 150K—the chance of an upside surprise looks meaningful. One way to position for more yen strength, while limiting downside if US data is strong, is to buy short-dated JPY call options.
This near-term move also fits the broader shift since the Bank of Japan ended negative interest rates in 2024. That decision started to narrow the gap between US and Japanese bond yields. A smaller yield gap tends to pressure USD/JPY. If the BoJ keeps moving toward policy normalization, the longer-term case for a stronger yen stays in place.
It is also important to remember the yen’s role as a safe-haven currency, which can help support its value during periods of stress. Any unexpected global market shock in the coming weeks could boost yen demand, even without changes in Japan’s domestic outlook. That remains another potential tailwind for long JPY positions using futures or options.
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