Insights 
VT 
The USD/JPY falls to around 153.65 in early Asian trading due to concerns over a US government shutdown. The Senate’s failure to pass a funding bill threatens to make this the longest federal funding lapse in US history.
The standoff has seen a Republican-backed temporary legislation fail in the Senate for the 14th time. No additional votes are planned, raising worries about a prolonged shutdown that could weaken the US Dollar in the short term.
Japanese Authorities and Financial Policies
Potential intervention by Japanese authorities might fortify the JPY, with comments from Japan’s Finance Minister emphasising the importance of stable currency movements. Meanwhile, uncertainty over the Bank of Japan’s next rate hike limits the JPY’s advance.
Market participants are focused on upcoming data, such as the ADP Employment Change and the US ISM Services PMI for October. Traders are also anticipating the economic strategies of Japan’s new Prime Minister.
The performance of the Japanese Yen is influenced by the Bank of Japan’s policy, bond yield differences with the US, and overall risk sentiment. The Yen is often seen as a safe-haven currency, gaining strength during times of market stress.
With USD/JPY hovering near 153.50, we see the primary driver as the ongoing US government shutdown. This situation is creating significant uncertainty for the US dollar, suggesting a bearish outlook for the currency in the short term. Derivative traders should be positioned for heightened volatility as long as the political deadlock in Washington continues.
Looking at historical precedent, the 35-day shutdown back in late 2018 and early 2019 saw the US Dollar Index (DXY) fall by over 1%. Given that the current shutdown is threatening to become the longest on record, we could see similar or even greater selling pressure on the dollar. This makes buying put options on USD/JPY an attractive strategy to hedge against or speculate on further dollar weakness.
Threat of Japanese Intervention
The threat of intervention from Japanese officials adds another layer of downward pressure on this pair. We remember the interventions in September and October of 2022, which occurred at levels below where we are trading today. With the pair currently above 153.00, the risk of officials stepping in to strengthen the yen is extremely high, reinforcing the case for bearish positions.
However, we must also consider the Bank of Japan’s cautious approach to monetary policy, which could cap the yen’s strength. Japan’s core inflation, which registered 2.8% year-over-year in the latest reading for September 2025, has not yet forced a hawkish pivot from the central bank. This uncertainty from the BoJ conflicts with the shutdown narrative, making directional bets risky.
Given these opposing forces, volatility is the main theme for the coming weeks. We anticipate sharp, unpredictable moves rather than a smooth trend in one direction. Options strategies that profit from large price swings, such as long straddles or strangles, should be considered to capitalize on this environment.
In the immediate term, upcoming US data like the ISM Services PMI will be crucial. A weak report would intensify concerns about the economic impact of the shutdown, likely sending USD/JPY lower. Conversely, a surprisingly strong number could create a temporary squeeze, highlighting the need for strategies that can handle a move in either direction.
