The Japanese yen is holding a modest intraday gain against a weakening U.S. dollar amid speculation that authorities may be ready to intervene to prevent excessive depreciation of the national currency. Japanese officials have toughened their rhetoric regarding potential intervention, confirming close coordination with the United States to counter sharp currency fluctuations. This triggered a reversal in USD/JPY from the 157.65 level—a two-week high formed after the decisive victory of Prime Minister Sanae Takaichi in Sunday's election.

The voting results pave the way for Takaichi's expansionary fiscal policy and heighten concerns over Japan's record-high public debt. In addition, new data point to a twelfth consecutive month of declining real wages in December, as nominal wage growth lagged behind still-elevated consumer inflation. This increases pressure on the Bank of Japan to proceed cautiously following the December rate hike to a 30-year high.

Optimistic sentiment in financial markets is limiting the yen's appeal as a safe-haven asset and supporting the USD/JPY pair. Takaichi's Liberal Democratic Party (LDP) easily secured 233 seats to gain a majority in the lower house, marking a resounding victory. This outcome opens the door to tax cuts and higher defense spending, further aggravating the strain on Japan's public finances.

Japan's Finance Minister Satsuki Katayama said she is ready to engage with markets as early as Monday to stabilize the yen if necessary. She confirmed ongoing dialogue with U.S. Treasury Secretary Scott Bessent and emphasized Japan's right to intervene against moves that deviate from fundamental principles. Chief Cabinet Secretary Minoru Kihara expressed concern about one-sided currency movements, while currency diplomat Atsushi Mimura pledged close monitoring with heightened vigilance, providing support to the yen at the start of the week.

The Ministry of Labor reported that nominal wages rose 2.4% year on year in December 2025, compared with a revised +1.7% previously, but the figure fell short of consensus forecasts. Inflation-adjusted real wages declined by 0.1% year on year, marking the twelfth straight month of contraction. These figures dampen expectations of a near-term Bank of Japan rate hike, as policymakers stress the need for sustained wage growth before further monetary tightening.

Together with strong global risk appetite in equity markets, this is restraining the yen's recovery. Indirect U.S.–Iran talks on the nuclear program concluded on Friday with an agreement to pursue a diplomatic approach, reducing the risk of conflict in the Middle East despite newly announced sanctions.

The U.S. dollar is facing selling pressure for a second consecutive day on expectations of Federal Reserve rate cuts (two cuts priced in for 2026), contrasting with the Bank of Japan's gradual normalization and thereby limiting USD/JPY upside. Therefore, bulls should proceed with caution.

For better trading opportunities, it is worth waiting for the release of U.S. nonfarm payrolls (NFP) on Wednesday and Friday's U.S. consumer inflation data, which could drive the dollar and refresh momentum in USD/JPY. However, attention should also be paid to U.S. data on Tuesday, as retail sales figures will affect dollar volatility and, consequently, the pair's dynamics.

From a technical perspective, USD/JPY is showing resilience near the 100-hour EMA, halting the intraday correction around 156.20, which now serves as a reference level for intraday traders. The MACD indicator is negative, signaling increasing downward pressure. The Relative Strength Index (RSI) is also in negative territory.

On the daily chart, oscillators are mixed, with the RSI remaining in positive territory, indicating that bulls still retain control for now. The pair is also holding above the 20-day SMA, located around 156.50. A break below this level would signal a loss of bullish control.