USD/JPY slipped to about 153.15 in early European trading on Wednesday, with the yen moving above 153.00. The move followed the general election, as flows into Japanese equities supported demand for the currency.
Japan’s Nikkei 225 ended at an all-time closing high for a third straight day on Wednesday. Foreign buying of Japanese shares added to yen demand and weighed on USD/JPY.
Fiscal Optimism And Market Focus
Traders are also weighing expectations that Japan PM Takaichi may take a more fiscally responsible approach. Market focus remains on the US January jobs report later on Wednesday.
The US data release was delayed slightly after a four-day government shutdown. Nonfarm Payrolls are expected to rise by 70K in January after a 50K gain in December.
The Unemployment Rate is forecast to stay at 4.4%. Average Hourly Earnings are seen easing to 3.6% from 3.8%.
The yen’s moves are often linked to Bank of Japan policy, Japan–US bond yield spreads, and shifts in risk sentiment. Ultra-loose BoJ policy from 2013 to 2024 was associated with yen weakness, while the 2024 shift away from that stance has supported the yen.
Positioning For Jobs Data Volatility
We are seeing strong momentum for the Japanese Yen, driven by fiscal optimism and capital flowing into equities. Data from the Ministry of Finance showed foreign investors were net buyers of Japanese equities for the fifth straight week, pouring in over ¥800 billion and pushing the Nikkei 225 to new highs. This buying pressure on the Yen is likely to continue as long as this positive sentiment holds.
The main event today is the US jobs report, and we should be positioned for volatility. With expectations at a low 70K, especially when we recall that most reports in 2025 exceeded 150K, the risk of a surprise to the upside is significant. Buying short-dated JPY call options could be a way to gain from further Yen strength while limiting our risk if the US data comes in unexpectedly strong.
This short-term trend fits within the larger shift we’ve seen since the Bank of Japan ended its negative interest rate policy back in 2024. That move began the process of closing the gap between US and Japanese bond yields, which has been a headwind for the USD/JPY pair. As long as the BoJ continues on this path of normalization, the fundamental case for a stronger Yen remains intact.
We should also remember the Yen’s role as a safe-haven currency, which provides a floor for its value. Any unexpected global market stress in the coming weeks would likely increase demand for the Yen, independent of domestic factors. This adds another potential catalyst for our long JPY positions through futures or options.
