USD/JPY erased most of its early losses and traded slightly lower near 154.85 during the European session on Monday. The move followed a rebound in the US Dollar after an early drop tied to a US Supreme Court ruling on President Donald Trump’s tariff policy.
The US Dollar Index (DXY) was down 0.13% at about 97.66 at the time, after recovering from around 97.40. The Supreme Court called Trump’s tariff policy “illegal,” saying he exceeded his authority by using the International Emergency Economic Powers Act (IEEPA) to impose reciprocal duties.
Markets Reprice Policy Commitment
After the ruling, President Trump announced 15% global tariffs to keep trade deals in place. Markets later stabilized as attention moved to other ways the White House could keep its trade strategy on track.
The Japanese Yen gave back its early gains after weaker National CPI data for January. Headline CPI rose 1.5% year over year versus 2.1% in December. CPI excluding fresh food eased to 2.0% from 2.4%, in line with expectations.
The date today is 2026-02-23T16:11:08.287Z.
In hindsight, the market reaction to the US Supreme Court ruling in early 2025 was a textbook head fake. USD/JPY dipped at first, then reversed once traders saw the White House was still committed to tariffs. The key lesson was to focus on the administration’s policy direction, not short-term legal or political headlines.
Positioning For Volatility Regimes
That lesson still matters today, because the 15% global tariffs introduced in 2025 are still shaping markets. US CPI for January 2026 came in hotter than expected at 3.5%. This supports the view that the Federal Reserve is not in a hurry to cut rates. That backdrop supports the US Dollar, which means politically driven dips may offer chances to buy dollar call options.
On the other side of the pair, Japan’s economic outlook has not changed much since last year. The latest national CPI came in at just 1.8%, extending the soft-inflation trend and keeping the Bank of Japan on hold. This ongoing policy gap versus the US makes selling Yen futures or buying puts on the currency an attractive idea.
The main takeaway from 2025 is that headline risk creates volatility, and volatility creates opportunity for derivatives traders. With geopolitical tensions still elevated, implied volatility in USD/JPY options has been rising and recently reached 12-month highs near 14%. This setup favors strategies that benefit from big moves, such as buying straddles ahead of major trade announcements.
As a result, the key forces that pushed USD/JPY higher after the brief 2025 dip look even stronger today. The interest-rate gap continues to widen, and the fundamental case for a strong dollar against a weak yen remains solid. With USD/JPY now trading near 162.50, it still makes sense to use call option spreads to target more upside while keeping costs under control.
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