Concerns over Bank of Japan intervention drive yen appreciation, while political uncertainty limits further gains

The Japanese yen has performed better than the US dollar amid market concerns over a US-Japan joint intervention. Domestic political uncertainty ahead of the early elections on February 8 has limited the yen's gains. The US dollar has maintained its recent strong rebound, helping to limit further declines in the USD/JPY pair. During Tuesday's Asian trading session, the Japanese yen (JPY) rose slightly against the US dollar (USD), seemingly ending a two-day decline and hitting a low not seen in over a week. The latest comments from Japanese Finance Minister Shunichi Suzuki have opened the door for a US-Japan joint intervention to curb the yen's depreciation and have acted as a boost amid hawkish expectations from the Bank of Japan (BoJ). On the other hand, the US dollar (USD) is seen as consolidating its recent rebound and forming resistance against the USD/JPY currency pair. However, domestic political uncertainty ahead of the early elections on February 8 and fiscal concerns arising from Prime Minister Fumio Kishida's reflation policies may limit the yen's gains. Additionally, the generally positive tone in the stock market requires some caution before making aggressive bullish bets on the safe-haven yen. Meanwhile, the nomination of Kevin Walsh as the next Federal Reserve (Fed) Chair may support the dollar and help limit losses in the USD/JPY currency pair, especially ahead of the US JOLTS job openings data to be released later today. Japanese Finance Minister Shunichi Suzuki stated on Tuesday that she will continue to closely coordinate with US authorities and respond in a timely manner based on the US-Japan joint statement issued last September. Furthermore, Suzuki defended Prime Minister Kishida's comments on the benefits of a weaker yen made on Monday, stating that the Prime Minister was speaking generally about the impact of a weak yen on the economy. Minutes from the Bank of Japan's January meeting indicated that policymakers discussed the price pressures brought about by a weak yen, highlighting the hawkish views of board members. Prime Minister Fumio Kishida has pledged to suspend the food consumption tax for two years if her Liberal Democratic Party wins the early elections on February 8, raising concerns about the sustainability of the national finances. US President Donald Trump announced on Monday that the US and India have reached a trade agreement, which will immediately lower tariffs on each other's goods, boosting investor confidence and limiting gains in the safe-haven yen. Additionally, signs of easing tensions between the US and Iran have reduced risk premiums and supported positive risk sentiment, which may further weaken demand for the yen. Trump has nominated former Fed Governor Kevin Walsh to succeed Jerome Powell as Fed Chair in May, pending Senate approval. Walsh's hawkish background suggests that he will remain vigilant if inflation expectations begin to rise. A survey by the Institute for Supply Management showed that US factory activity grew for the first time in a year, with the manufacturing PMI rising to 52.6 in January, marking a significant recovery from last month's 47.9. This, in turn, has helped the dollar maintain its strong rebound from the four-year low reached last week and should help limit any significant declines in the USD/JPY currency pair, keeping bears cautious. Traders are now looking forward to the US JOLTS job openings data to provide some momentum for the North American trading session. However, the mixed fundamental backdrop requires caution before making new directional bets on USD/JPY The spot price is struggling at the 50% retracement level of the recent drop from 159.23 to 152.10. A sustained strong breakout could push the USD/JPY currency pair up to the convergence level of 156.45, which includes the 61.8% Fibonacci retracement level and the 200-period simple moving average (SMA) on the 4-hour chart. The latter is sloping down near 156.50, maintaining an overall heavy tone. The USD/JPY currency pair is trading below this long-term indicator, and any rebound attempts will face selling pressure upon testing. A decisive breakout of this range could unlock further rebounds, while failure to break through would keep sellers in control and pose a risk of a pullback within the current bearish structure. The Moving Average Convergence Divergence (MACD) line remains in positive territory and above its signal line, although momentum has weakened, with the histogram narrowing. The Relative Strength Index (RSI) is at 61, solidly above the 50 midline, and has not reached overbought conditions. If the 200-period SMA is not consistently broken, any rebound will still be corrective in nature