The Japanese Yen came under pressure after Prime Minister Takaichi introduced a new economic growth strategy set for next summer. Analysts from OCBC, Frances Cheung and Christopher Wong, noted that USD/JPY was last seen at 154.53. The government plans to increase tax revenue without raising tax rates and to encourage investments between the public and private sectors. Several factors, such as a delay in the Bank of Japan’s policy changes, rising fiscal burdens, and increased spending on social and defense programs, along with the possibility of early elections, may weaken the Yen. Takaichi holds a strong approval rating of 74%. Finance Minister Katayama highlighted the need for quick action regarding foreign exchange moves, helping ease some losses for the Yen. While verbal interventions might slow the Yen’s decline, they are unlikely to change overall market trends. It is advised to closely monitor the intervention strategies from the new Finance Minister, as Yen bears remain cautious. For USD/JPY to drop, we need a weaker USD and a more assertive approach from the Bank of Japan. Current trends show slight bullish trends, with RSI levels approaching overbought conditions. Key support levels are at 153.30 and between 151.60 and 151.80. The government’s growth strategy is creating downward pressure on the Yen, pushing USD/JPY to 154.53. Prime Minister Takaichi’s plan to stimulate the economy without raising taxes indicates more government spending and a pause in policy tightening by the Bank of Japan. This is fundamentally bearish for the Japanese Yen in the short term. The main factor driving this trend is the large interest rate gap between the U.S. and Japan. Recent data shows the U.S. 10-year Treasury yield stable at around 4.6%, while Japan’s 10-year government bonds yield just 1.1%. This makes the carry trade in favor of the dollar very attractive. Japan’s inflation in October 2025 came in at a stubborn 2.9%, leaving the Bank of Japan in a tricky position, but they haven’t indicated an urgent need for rate hikes. Katayama’s comments about being vigilant on currency movements should be taken seriously. We recall the significant interventions to buy yen that occurred in late 2022 and again through mid-2024 when the Ministry of Finance stepped in to support the currency. While verbal warnings may only slow the USD/JPY’s rise, the threat of actual intervention could make traders hesitant to push the currency pair much higher. Given the current mild bullish trend, traders might look at buying call options on USD/JPY to take advantage of possible gains toward the 155 mark. This strategy allows for potential profits while managing risk if the Ministry of Finance intervenes. Takaichi’s high approval rating suggests strong backing for her growth-centered policies, which may lead to a weaker Yen. To protect against the risk of a sudden reversal from intervention, purchasing put options could be a wise move. This would offer downside protection if the verbal warnings turn into actions, potentially sending USD/JPY back toward support at 153.30. The mixed signals from the government’s growth agenda and the finance ministry’s warnings might heighten volatility, making volatility-based strategies appealing. We must also pay attention to the U.S. dollar side, as any significant decline in USD/JPY would likely need a weaker U.S. dollar. The slightly softer U.S. jobs report from last Friday has tempered expectations for further interest rate hikes by the Federal Reserve, likely contributing to the moderated rise in the pair and explaining why momentum isn’t more aggressive.

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