Japanese Yen Weakens Despite Soft USD as Political and BoJ Uncertainty Weigh

Japanese Yen Struggles to Hold Gains Against Soft USD Amid Election and BoJ Uncertainty

USD/JPY Rises Above 148.00 as JPY Fails to Capitalize

The Japanese Yen (JPY) is facing renewed weakness despite a generally softer US Dollar (USD), with the USD/JPY pair rebounding above the 148.00 mark in Monday's early European session. Although the Yen opened the week with a shallow bullish gap, it has since lost traction due to a mix of domestic political uncertainty and dovish central bank expectations.

Political Turmoil in Japan Adds Pressure to JPY

The upper house election in Japan on Sunday dealt a blow to the ruling coalition. The opposition has since called for higher spending and lower taxes, raising concerns over government debt and economic policy continuity. The political instability is seen as a negative factor for the Yen, especially as it could complicate US-Japan trade negotiations with the August 1 tariff deadline looming.

BoJ Unlikely to Hike Rates Amid Weak Growth

Fundamentally, the Bank of Japan (BoJ) is expected to hold off on any interest rate hikes due to:

Weak GDP growth
Falling real wages
Signs of moderating inflation

This cautious monetary policy stance significantly undermines JPY bullish potential in the short term.

USD Under Pressure, But Fed Path Remains Unclear

While the US Dollar remains below its recent highs due to dovish Fed commentary, the outlook remains mixed. Fed Governor Christopher Waller recently called for a rate cut in the upcoming July meeting to support a weakening private sector labor market, but overall policy direction still lacks clarity.

This indecision, coupled with global trade anxiety, is capping the upside in USD/JPY, yet not providing enough strength to support the Yen as a true safe-haven.

Market Outlook: JPY Bear Bias Intact

With no major economic data scheduled for Monday, technical price action and broader fundamentals will likely dictate movement. Traders should be cautious with aggressive JPY long positions, as the setup leans bear-biased and any dips in USD/JPY may present buying opportunities.