USD/JPY Forecast: Yen Slump Continues, Raising Intervention Risks
By Fawad Razaqzada, Market Analyst
Date: 25/02/2026
Market Sentiment Overview
Recent market sentiment has been positive, largely due to Anthropic's announcement of new partnerships, which alleviated concerns regarding AI disruptions. As a result, stock prices have risen, leading to a softening of the US dollar against various currencies, including the euro and sterling. However, the dollar has gained against the Japanese yen, which has seen a significant decline following comments from Prime Minister Takaichi expressing concerns over potential tightening by the Bank of Japan (BoJ).
Yen Weakness and Intervention Risks
The yen's recent weakness has raised the possibility of government intervention. Prime Minister Takaichi has indicated that authorities are closely monitoring foreign exchange movements. This has led to speculation about potential intervention measures if the yen continues to decline. Despite the yen's current weakness, the overall policy direction of the BoJ appears to remain stable, although political developments may influence future actions.
Bank of Japan's Policy Outlook
Recent reports suggest that the nomination of two new board members at the BoJ may lead to a more dovish stance, potentially resisting further tightening. However, the overall shift in the board's balance between hawks and doves is expected to be modest. Upcoming inflation data from Tokyo is anticipated to show a decrease, which may delay any rate hikes until June, contingent on wage growth trends.
Technical Analysis of USD/JPY
The USD/JPY has experienced a significant rally but has not yet broken the broader trend of lower highs established since January. Key resistance is noted at 157.66, while support levels are identified at 155.65 and 155.05. A daily close below 155.00 could signal a bearish trend, with further declines possible if the price breaks below 154.52.
Dollar Performance and Economic Indicators
Outside of the USD/JPY, the dollar has shown mixed performance. Recent economic data, including a rise in consumer confidence, has provided some support for the dollar. However, the market's reaction to political events, such as the President's State of the Union address, has been limited. Upcoming economic indicators, including jobless claims and producer price index data, are expected to influence market sentiment further.