📊 USD/JPY’s upside capped by intervention fears; U.S. government shutdown risk back in focus
■ Overview
USD/JPY continues to take on the character of a politics-driven market plus intervention-alert market.
At the end of last week, the pair briefly climbed into the 159s after BOJ Governor Ueda’s press conference, but then plunged by roughly 2 yen. It later returned to the 158s, yet failed to retake the highs, and eventually closed the NY session down in the mid–155s.
That was a 3.6-yen drop from the peak, and the market quickly began pricing in speculation that:
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Japan’s Ministry of Finance (MoF) / BOJ, and
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the U.S. Treasury / Federal Reserve
were conducting behind-the-scenes FX coordination and/or rate checks.
As a result:
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1-week USD/JPY implied volatility surged from ~8% to near ~12%,
pushing the market into a clear “emergency mode.”
■ Start of the week: Yen strength accelerates
In Monday’s Tokyo session, USD/JPY extended its decline:
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from the mid–155s → below 155,
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and briefly below 154.
Key drivers included:
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renewed risk that the U.S. government could shut down again,
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reports of a shooting/clash involving U.S. federal immigration authorities,
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a resurgence of U.S. political instability concerns.
Volatility then expanded even further:
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1-week volatility widened to around ~14%,
a level described as the highest since May 2024.
■ Current market structure
USD/JPY is now a battlefield where opposing forces collide:
| Yen-weakening forces | Yen-strengthening forces |
|---|---|
| Expectations of a continuing Takaichi administration | Heightened FX intervention fears |
| Yen carry trades | “U.S. selling” driven by political instability |
| Japanese equity inflows | Speculation of official rate checks |
However, judging by the late-week price action:
Yen-strengthening pressure is currently dominating.
That shift has pushed the market’s focus to a new question:
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Is a move toward sub-150 possible?
■ A dangerous week packed with political event risk
This week is loaded with major catalysts:
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FOMC meeting
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Japan’s general election (voting day: Feb 8)
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U.S. budget negotiations (shutdown risk)
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Trump headline risk
The sharp post-BOJ move last week effectively “printed” the market’s perceived intervention warning line, increasing expectations that authorities may stay highly sensitive around the FOMC as well.
■ Today’s data & events
Economic data
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Germany: Ifo Business Climate (Jan)
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Mexico: Employment report (Dec)
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U.S.: Durable Goods Orders (prelim, Nov)
Speakers
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Nagel (Bundesbank President)
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Kocherlakota / Austrian central bank (as listed)
Market events
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U.S. 2-year Treasury auction (USD 69B)
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U.S. monetary authorities remain in the blackout period (through the 29th)
■ Early London session: Yen buying returns
In early London trading, yen buying regained traction:
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USD/JPY: briefly 153.40
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EUR/JPY: 181.92
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GBP/JPY: 209.64
Cross-yen pairs were broadly weaker.
Bloomberg reported that no clear evidence of Japan’s FX intervention on the 23rd was confirmed. Even so, market psychology remains:
“Live rounds could fly at any moment.”
■ Summary
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USD/JPY is fully in intervention-alert mode
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U.S. shutdown risk + U.S. political instability are adding USD-selling pressure
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Volatility is at extreme levels (~14%)
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The biggest theme: Is this a genuine trend shift toward yen strength?
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This week is an ultra-unstable mix of:
FOMC × Japan election × political headlines × intervention risk
In short:
We’ve entered a phase where fundamentals take a back seat—and states and central banks move the market.
