Yen Slide Accelerates as Japanese Government Signals Concern.
Trading Leveraged products is Risky
The US Dollar continues to do well in 2026 despite the US government’s attempt to lower interest rates. The main gains are being seen against the Japanese Yen, which is witnessing high levels of volatility. The Japanese government has gone as far as discussing the decline with the US, which is further damaging market sentiment.
The USDJPY has risen in value for two consecutive weeks and is now trading at the highest level since July 2024. The US Dollar is increasing against most currencies, but the bullish price movement is primarily being driven by the decline in the Yen.
The main factors driving the Japanese Yen lower are rumours that the Japanese Prime Minister is considering snap elections towards the end of February, and ministers’ concern over the weakening of the Japanese Yen. In the past, the Japanese Government has intervened to boost the currency. However, this has not yet taken place.
Takaichi Calling Snap Elections?
The market is closely watching media reports suggesting that Prime Minister Sanae Takaichi may soon call a snap general election to capitalise on her strong approval ratings. The new Japanese Prime Minister’s ratings over the past few months have considerably risen.
However, analysts caution that moving towards an early vote could make it more difficult to secure parliamentary approval for the government’s proposed budget, which features substantial spending measures aimed at supporting households and the broader economy. As a result, the Japanese Yen has come under pressure.
The Japanese Yen is currently the worst-performing currency in 2026, declining 1.40% so far. However, many economists believe an intervention within the upcoming days is likely if the Yen does not rebound. However, some analysts are indicating the new Japanese government is likely to wait for a larger decline before intervening. The Financial Times indicates an exchange rate above $160.000 would significantly increase the possibility of a currency intervention.
Concerns Over The Japanese Yen’s Decline
The Japanese Finance Minister, Mr Katayama, spoke to journalists last night after meeting with his US counterpart. Both the US Treasury, Scott Bessent, and Mr Katayama expressed concerns over the Yen’s decline. According to reports, the main concern for both individuals is not the decline in the currency, but the pace of the decline and its one-sidedness.
US Government Attempt to Bring Rates Down
The Trump administration continues its attempt to bring interest rates down through multiple routes. The route receiving the most attention is the investigation into the Federal Reserve’s Chairman. However, the US is also considering a cap on credit card rates and has ordered the purchase of mortgage bonds.
The US government is not hiding the fact that both moves aim to bring down interest rates in order to boost the US property market. Economists also note that towards the end of the Biden administration the US property market was in its worst state since the previous financial crisis.
Certain Wall Street banks are also supporting the bullish trend maintaining momentum this year. Goldman Sachs has given a target price of $4,900. Bank of America and JP Morgan have given a target of $5,000. However, in the short-term, for bullish signals to be valid, the price must remain above $4,542.75, according to the 200-bar MA.
The US Dollar Index
The US Dollar Index started the week with a bearish price gap and a decline. However, the currency rose in value during the US session and is currently holding onto these gains this morning. Today’s Consumer Price Index (inflation) and tomorrow’s Producer Price Index (producer inflation) will be key.
Analysts expect the US inflation rate to remain at 2.7%, which is moderately above the Fed’s target. If the inflation rate falls below this level, more frequent rate cuts will become possible. As a result, the US Dollar may again witness bearish swings. However, if the figure is higher, market participants will price in higher interest rates for the upcoming months.
USDJPY - Technical Analysis
In terms of technical analysis, the US Dollar remains favourable. The US Dollar Index remains above both Moving Averages and VWAP. The USDJPY is also experiencing ‘buy’ signals from trend-based indicators.
HFM - USDJPY 6-Hour Chart
However, all traders are extremely cautious about a possible Japanese intervention and the upcoming inflation data. Nonetheless, the price of the USDJPY is likely to maintain buy signals if the exchange rate remains above 158.365. If the USDJPY drops below this level, signals are potentially likely to change.
Key Takeaways:
* The US Dollar strengthens in 2026 despite government efforts to push interest rates lower.
* USDJPY rises for two straight weeks, driven mainly by sharp Yen weakness.
* Snap election speculation and budget risks put additional pressure on the Japanese Yen.
* Economists expect possible yen intervention if USDJPY approaches or exceeds the 160 level.
* Inflation data and intervention risk dominate near-term USDJPY trading sentiment.
Always trade with strict risk management. Your capital is the single most important aspect of your trading business.
Please note that times displayed based on local time zone and are from time of writing this report.
Click [url='https://www.hfm.com/hf/en/trading-tools/economic-calendar.html']HERE[/url] to access the full HFM Economic calendar.
Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click [url='https://www.hfm.com/en/trading-tools/trading-webinars.html']HERE[/url] to register for FREE!
[url='https://analysis.hfm.com/']Click HERE to READ more Market news.[/url]
Michalis Efthymiou
HFMarkets
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
