USD/JPY slid during Asian trading on Monday. It fell toward 154.00 before recovering slightly to around 154.35. The pair was still down more than 0.45% on the day and remained vulnerable to further losses.
Sentiment weakened after US President Donald Trump announced a new 15% global levy. This followed a Supreme Court ruling on Friday that went against his broader tariff plan. The announcement raised concerns about retaliation and supply-chain disruption. That helped the Japanese Yen and pressured the US Dollar.
Policy And Data Driving The Move
US data on Friday showed the core PCE Price Index rose more than expected in December. This supported the view that the Federal Reserve will keep rates unchanged in March. Even so, markets still expect two 25-basis-point rate cuts this year after US GDP growth slowed to a 1.4% annualised pace in Q4.
In Japan, weak Q4 growth increased calls for more stimulus. At the same time, an inflation gauge slowed to its weakest pace in two years. This reduced expectations of an early Bank of Japan rate hike and limited further Yen gains. Trading was also thin due to a bank holiday.
At this time in 2025, markets shifted sharply into risk-off mode as trade-war fears returned. The Japanese Yen strengthened on safe-haven demand, pushing USD/JPY down toward 154.00. At the time, the market was also pricing in two potential rate cuts from the US Federal Reserve for that year.
Now, on February 23, 2026, the picture is different and may offer new opportunities. The Fed delivered only one 25-basis-point cut in late 2025, as inflation stayed stubborn. The latest January 2026 CPI showed inflation running at 2.9% year over year. In Japan, core inflation has edged up to 2.3%, increasing pressure on the Bank of Japan to begin normalising policy.
This gap in policy expectations is creating tension. It has also pushed one-month implied volatility for USD/JPY options close to 12%. That suggests the market is preparing for a meaningful move in the coming weeks. Traders may consider strategies designed to benefit from a large move in either direction, such as long straddles or strangles.
Options Strategies For High Volatility
If, instead, central banks stay cautious and USD/JPY remains range-bound, selling premium may be more attractive. For example, an iron condor lets traders define a price range and profit if USD/JPY stays within that range through expiration. With implied volatility elevated, this approach can collect a larger premium upfront.
It also helps to review how other safe-haven assets behaved during the 2025 risk-off episode. US 10-year Treasury yields (which move inversely to bond prices) dipped below 3.8% during that period. Since then, they have risen to around 4.2% this week. This reflects a reassessment of the Fed’s path and a steadier outlook for global trade.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
