USD/JPY traded near 155.95 on Tuesday, up 0.80% on the day. The move followed stronger US data and continued weakness in the Japanese yen. US consumer confidence improved in February. The Conference Board’s index rose to 91.2 from 89.0 previously (revised). Even so, it remains well below the 112.8 peak seen in November 2024.

Dollar Demand And Trade Risk

The US Dollar Index (DXY) moved toward 98.00 as demand for the dollar increased. A US Supreme Court decision that challenged some tariff measures weighed on the dollar at first. However, a new 15% global levy announced by President Donald Trump renewed trade concerns and boosted safe-haven demand. Minutes from the Federal Open Market Committee showed that several Federal Reserve members think it is too early to ease policy further without clearer progress toward the 2% inflation target. Markets still price in several 25-basis-point cuts this year, which limits the dollar’s medium-term upside. In Japan, the yen stayed under pressure after reports that Prime Minister Sanae Takaichi voiced concerns about further rate increases during a meeting with Bank of Japan Governor Kazuo Ueda. Ueda said no specific policy requests were made. Still, the discussion increased speculation that policy normalisation could move more slowly. BNY, MUFG, and Société Générale highlighted political friction, shifting expectations for tightening as early as spring, and a weaker relationship between rate differentials and USD/JPY. They also said Japan’s growth outlook may matter more for the currency in the near term.

Looking Back And Forward

In early 2025, political pressure on the Bank of Japan and a rebound in US confidence helped push USD/JPY toward 156. Now, on February 24, 2026, that policy gap has widened further, with the pair trading near 162.50. This supports the strong trend that was already forming a year ago. In 2025, markets expected several Federal Reserve rate cuts. But inflation stayed high, and only one 25-basis-point cut was delivered late in the year. The latest January 2026 CPI print came in at a stubborn 3.2%, and hopes for aggressive easing this year are fading. This continues to support the US dollar. The 2025 concerns about political influence on Bank of Japan policy also proved justified. The BoJ managed only one cautious rate hike in mid-2025 and then paused. Markets now read that as a sign the bank has limited room to tighten. Governor Ueda’s recent comments still stress caution, which keeps the yen under pressure. With USD/JPY at multi-decade highs, outright long positions carry more risk. Still, the broader trend remains strong. Traders appear to prefer USD/JPY call options to keep upside exposure while limiting downside risk. Strikes around 164.00 for the coming weeks have become more popular. Implied volatility has risen to 9.5%, suggesting the market is preparing for either a breakout or a sharp pullback. At the same time, traders are watching for signs of a US slowdown, as the confidence rebound seen in early 2025 has faded. The latest University of Michigan sentiment reading for February 2026 fell to 78.5, suggesting high rates are starting to weigh on households. This makes strategies like call spreads appealing, as they can benefit from a steady move higher while providing some protection against a sudden reversal. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now