🗞️ Lower House Election vs. Weakening U.S. Employment — USD/JPY Pauses After Its Latest Rally
This week’s FX market has been highly sensitive, caught between political factors and economic data. While USD/JPY remains in an overall uptrend, the push higher in the 157 area has paused for now.
🇯🇵 Yen Weakness Factors
Election optimism remains, but overheating risks are rising
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Expectations of a landslide victory by the ruling coalition continue to support yen selling
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The so-called “Takaichi trade,” driven by expectations of policy continuity, remains firmly on investors’ radar
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However, with the election just around the corner, the market has entered a phase where position adjustments are more likely
In particular, caution is warranted toward expectations centered on symbolic figures, such as “300+ seats.” Even a slight shortfall relative to expectations could trigger swift position unwinds.
🇺🇸 Factors Capping the Dollar
Emerging signs of labor market slowdown
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Improvements in the ISM manufacturing and non-manufacturing indices continue to provide underlying support for the dollar
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At the same time:
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A sharp downside surprise in December job openings
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The delay of employment data due to the U.S. government shutdown
are reinforcing concerns about a slowdown in the labor market, acting as a brake on further dollar gains
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📉 Sharp Swings in Risk Assets Cloud Market Direction
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Following a sharp drop in Bitcoin, gold and silver also sold off abruptly
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Volatility has surged across risk assets
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In FX, the presence of major upcoming events makes it difficult for markets to commit to a one-way move
Heightened vigilance is still required for price swings when overextended expectations unwind.
💱 London Morning FX Snapshot
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USD/JPY
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Fell from the 157 level to around 156.52 during Tokyo hours
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Buying interest later emerged, lifting the pair back to 157.08 in early London trading
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Cross-yen
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Yen selling remained dominant
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EUR/JPY: early 185 handle
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GBP/JPY: early 213 handle
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However, EUR/USD and GBP/USD also advanced, indicating that this is not a one-sided yen-selling market.
📊 Key Events Ahead
Economic Data
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Canada employment report (January)
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University of Michigan Consumer Sentiment (preliminary, February) — expected to decline from the prior reading
Speeches & Events
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Remarks from U.S. and European central bank officials
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Release of the ECB Survey of Professional Forecasters
🧭 Summary — How to Read the Market
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USD/JPY: Holding the 157 area, but chasing the upside requires caution
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Core themes:
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Yen weakness driven by election expectations
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Dollar upside capped by signs of U.S. labor market cooling
→ This tug-of-war is likely to persist
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Key risk: Positioning skewed by expectation-led trades → heightened risk of sharp reversals depending on outcomes
Current Levels
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USD/JPY: 157.00
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EUR/JPY: 185.20
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GBP/JPY: 213.17
This is a market where “extended moves demand caution, and pullbacks require patience.”
A tense, event-driven environment typical of the run-up to major catalysts remains in place.
