FX.co ★ Japanese Yen Pressured by Fiscal Concerns

The Japanese yen edged closer to 158.5 against the U.S. dollar on Thursday, remaining under pressure due to a worsening fiscal outlook, coinciding with the start of a two-day meeting by the Bank of Japan. Prime Minister Sanae Takaichi announced a snap election and promised more lenient fiscal policies, such as the proposal to abolish the 8% sales tax on food. Meanwhile, the Bank of Japan is anticipated to maintain its policy interest rate at 0.75% on Friday, following a rate increase in December. Traders remain vigilant about possible intervention in the yen market, driven by fears about the consequences of a weaker currency on domestic inflation. On the economic data front, Japan's exports increased for the fourth straight month in December, reaching a historic high, buoyed by consistent demand from China despite ongoing diplomatic tensions. Exports for the entire year also rose in 2025, even as exports to the United States declined for the first time since the pandemic began, due to challenging trade policies.