Japan’s ¥122.3 trillion fiscal 2026 budget and a persistent US-Japan rate gap pressure the yen, lifting USD/JPY to multi-week highs.
The USD/JPY pair climbed to 159.25-159.30, recovering from an intraday dip below 159.00, as Japan’s yen weakened amid fiscal concerns. Prime Minister Sanae Takaichi’s government proposed a record ¥122.3 trillion budget for fiscal 2026, exacerbating worries over Japan’s debt levels.
The yen’s decline follows last week’s intervention-driven rebound, as the US-Japan interest rate gap sustains carry trade demand. A modest rebound in the US dollar, fueled by expectations of Fed rate hikes in 2026, further supported the pair. Oil price volatility and geopolitical tensions in key shipping lanes have kept inflation risks elevated, reinforcing hawkish Fed bets.
Spot prices remain near a one-and-a-half-week high, with traders eyeing further upside as the yen struggles under fiscal and monetary pressures.