"USDJPY touched 159.3 during the Asian session this morning, breaking above its 52-week high. This move is neither random nor purely technical; instead, it reflects a deeper shift in how the market is reassessing the relative strength of the U.S. dollar versus the Japanese yen. On the U.S. side, the strength of the dollar, with the DXY rising toward 98.8 - was reinforced after the latest inflation data failed to deliver the kind of cooling surprise markets had hoped for."
"December CPI rose 0.3% month-on-month, while headline CPI increased 2.7% year-on-year, both in line with expectations. In the current context, however, the fact that inflation did not ease further carries important implications. It suggests that the disinflation process remains controlled but not strong enough to justify an earlier rate cut by the Fed, thereby keeping U.S. yields attractive and supporting the dollar."
"By contrast, the weakness of the yen is no longer simply a story of interest rate differentials. The Japanese government has shown a tendency to continue expanding fiscal spending to support a sluggish economy, raising concerns over Japan's fiscal outlook. Japan already carries a heavy public debt burden. According to the IMF (WEO October 2025), Japan's general government gross debt stands at around 229.6% of GDP,"
USDJPY reached 159.3, breaking its 52-week high as markets reassess the relative strength of the U.S. dollar versus the Japanese yen. The DXY rose toward 98.8 after December CPI rose 0.3% month-on-month and 2.7% year-on-year, outcomes in line with expectations. The lack of a further inflation slowdown implies the disinflation process remains controlled but insufficient to justify an earlier Fed rate cut, keeping U.S. yields attractive and supporting the dollar. Confidence in the U.S. monetary policy framework and public support for Fed independence reinforce dollar strength. The Japanese government’s continued fiscal expansion and very high public debt raise long-term concerns and weigh on the yen.
Read at London Business News | Londonlovesbusiness.com
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