USD/JPY recovered most early losses and traded slightly lower near 154.85 in the European session on Monday. The move followed a rebound in the US Dollar after an initial dip linked to a US Supreme Court ruling on President Donald Trump’s tariff policy.
The US Dollar Index (DXY) was down 0.13% at about 97.66 at the time, after recovering from around 97.40. The Supreme Court called Trump’s tariff policy “illegal”, saying he exceeded his authority by using the International Emergency Economic Powers Act (IEEPA) to impose reciprocal duties.
Markets Reprice Policy Commitment
After the ruling, President Trump announced 15% global tariffs aimed at keeping trade deals in place. Markets later steadied as attention shifted to possible alternative routes for the White House to maintain its trade approach.
The Japanese Yen gave back early gains after weaker National CPI data for January. Headline CPI rose 1.5% year on year versus 2.1% in December, while CPI excluding fresh food eased to 2.0% from 2.4%, matching expectations.
The date today is 2026-02-23T16:11:08.287Z.
Looking back, the market reaction to the US Supreme Court’s ruling in early 2025 was a classic head fake. We saw an initial dip in USD/JPY before the market realized the White House’s commitment to tariffs was unwavering. This event taught us to focus on the administration’s underlying policy direction rather than temporary legal or political noise.
Positioning For Volatility Regimes
That lesson remains critical today, as the 15% global tariffs enacted in 2025 continue to influence markets. Recent US CPI data for January 2026 came in hotter than expected at 3.5%, reinforcing the view that the Federal Reserve will be in no rush to lower interest rates. This fundamentally supports a strong dollar, suggesting that any politically driven dips in the currency could present buying opportunities for dollar call options.
On the other side of the pair, Japan’s economic situation has not materially changed since last year. The latest national CPI figure registered just 1.8%, continuing the trend of soft inflation and keeping the Bank of Japan firmly on hold. This persistent policy divergence with the US makes selling Yen futures or buying puts on the currency an attractive strategy.
The main takeaway from 2025 is that headline risk creates volatility, which is an opportunity for derivative traders. With geopolitical tensions still simmering, implied volatility on USD/JPY options has been climbing, recently hitting 12-month highs around 14%. This environment is favorable for strategies that profit from sharp price swings, such as buying straddles ahead of major trade announcements.
Therefore, the core factors that pushed USD/JPY higher after the brief 2025 dip are even more entrenched today. The interest rate differential continues to widen, and the fundamental case for a strong dollar against a weak yen remains robust. With the pair now trading near 162.50, we see continued logic in using call option spreads to target further upside while managing costs.
