The Japanese Yen (JPY) extends its gains for the second consecutive session against a broadly weaker US Dollar (USD), climbing to a one-week high during Asian trading on Wednesday. Shifting US-China trade tensions, persistent geopolitical risks, and uncertainty surrounding the US government shutdown have fueled demand for safe-haven assets, including the JPY.
Additionally, recent comments from Finance Minister Katsunobu Kato raised speculation about potential government intervention to curb further JPY weakness, adding to its support.
The USD, meanwhile, remains under pressure amid dovish Federal Reserve (Fed) expectations, driving the USD/JPY pair lower toward the 151.00 round figure. On the domestic front, Japan’s ruling Liberal Democratic Party (LDP) saw its coalition with Komeito collapse last week, just ahead of the October 20 deadline to confirm Sanae Takaichi as the country’s first female Prime Minister. The resulting political uncertainty could limit the BoJ’s ability to tighten policy, capping further JPY appreciation.
Japanese Yen underpinned by safe-haven buying despite political uncertainty
Tensions escalated on Tuesday after China imposed new special port fees on US ships and tightened restrictions on rare earth exports, prompting US President Donald Trump to threaten 100% tariffs on Chinese imports and to halt trade in key commodities like cooking oil. These developments raised fears of a deeper trade war and drove investors toward traditional safe havens such as the Yen.
Media reports also indicated that Trump is considering supplying Tomahawk cruise missiles to Ukraine, keeping geopolitical risks elevated. Meanwhile, the US government shutdown—now extending into its third week after a failed Senate vote on a temporary funding bill—continues to weigh on sentiment.
In Japan, the LDP–Komeito coalition breakup adds to domestic political instability, complicating the parliamentary vote to confirm the next Prime Minister. According to Kyodo News, no agreement has been reached to hold the vote on October 21. This uncertainty could delay any potential Bank of Japan (BoJ) policy tightening, though traders still expect some degree of rate normalization later this year—a stark contrast to the Fed’s dovish stance.
According to the CME FedWatch Tool, markets have fully priced in a 25-basis-point Fed rate cut in October and see a 90% chance of another cut in December, adding pressure on the USD and weighing on the USD/JPY pair.
USD/JPY technical outlook
Repeated failures to hold above the 100-hour SMA and a decisive drop below the 200-hour SMA near 151.20–151.15 could signal further weakness in the pair. A sustained move below 151.00 would confirm a bearish breakout, opening the path toward 150.70 and the 150.00 psychological level.
On the upside, immediate resistance lies near 151.65–151.70, followed by 152.00 and 152.65–152.70. A break above the latter could shift the bias back to the upside, targeting 153.00 and the 153.25–153.30 zone—last week’s eight-month high.
