The USD/JPY currency pair is currently walking a tightrope, clinging to a critical support level around 152.00, and this is where the market's tension truly lies. As of Wednesday's European trading session, the pair has inched up by 0.27%, hovering near 153.70. But here's where it gets intriguing: this upward movement is largely fueled by the Japanese Yen's underperformance against its major counterparts. Why? Speculation is rife that Japan's Prime Minister Sanae Takaichi is gearing up to unveil a massive spending plan in the fiscal budget, aimed at turbocharging economic growth. But is this a bold move or a risky gamble?
In theory, a higher fiscal deficit can diminish the allure of a country's currency, and the Yen is no exception. This speculation has gained momentum following Japan's slower-than-expected Q4 GDP growth, which came in at a modest 0.1%, falling short of the 0.4% forecast. However, it's worth noting that this marks a return to growth after a 0.7% decline in the third quarter of 2025. And this is the part most people miss: while the growth is tepid, it’s a step in the right direction, yet the market’s focus remains on the upcoming fiscal measures.
Looking ahead, all eyes are on Japan’s National Consumer Price Index (CPI) data for January, set to be released on Friday. Expectations are for a 2% annualized increase, down from December’s 2.4%. Meanwhile, the US Dollar is holding its ground, with traders eagerly awaiting the Federal Open Market Committee (FOMC) minutes from the January meeting at 19:00 GMT. Could this be the catalyst for the next big move in USD/JPY?
From a technical standpoint, USD/JPY climbed to 153.57 during Wednesday’s session, but it’s still trading below the 20-day Exponential Moving Average (EMA) at 154.73. This suggests a bearish bias, with the EMA acting as immediate resistance. The 14-day Relative Strength Index (RSI) at 41.35 further underscores this bearish tilt, indicating waning upward momentum. A daily close above the 20-day EMA could alleviate some pressure, potentially paving the way for a corrective rally toward the February 9 high of 157.66. However, failure to reclaim this level would likely cap gains, keeping the pair under pressure. If the RSI slips toward 30, momentum could deteriorate further. A break below the January 27 low of 152.00 would open the door to a steeper decline, possibly targeting the psychological level of 150.00. Is this the beginning of a deeper correction, or just a temporary pullback?
(Note: The technical analysis in this article was enhanced with the assistance of AI tools.)
Economic Indicator Spotlight: Gross Domestic Product (QoQ)
Gross Domestic Product (GDP), released quarterly by Japan’s Cabinet Office, measures the total value of all goods and services produced in Japan during a specific period. It’s widely regarded as the primary gauge of Japan’s economic health. The QoQ reading compares economic activity in the reference quarter to the previous one. Generally, a high reading is seen as positive (bullish) for the Japanese Yen, while a low reading is viewed as negative (bearish). But what does this really mean for the average investor? A strong GDP can signal economic robustness, potentially boosting the Yen, while a weak reading may weigh on the currency. The latest release on February 15, 2026, showed a preliminary QoQ growth of 0.1%, missing the consensus estimate of 0.4% but improving from the previous -0.6%. Is Japan’s economy on the mend, or are these numbers a cause for concern?
Source: Japanese Cabinet Office (https://www.cao.go.jp/index-e.html)
Controversial Question: With Japan’s fiscal deficit potentially expanding and GDP growth lagging, is the Yen’s current weakness a buying opportunity or a warning sign? Share your thoughts in the comments below—let’s spark a debate!
