**MARKET BRIEF: USD/JPY & GLOBAL FX** **Election Jitters Weigh on Yen** Global currency markets are locked in a holding pattern as the countdown begins for Japan’s snap general election on **February 8, 2026**. The Japanese Yen remains the focal point of volatility, wobbling significantly against major peers. The USD/JPY pair is currently trading near **156.43**, reflecting sustained downward pressure on the Japanese currency despite repeated verbal warnings from officials in Tokyo. Traders are pricing in high stakes for Sunday’s vote. Prime Minister Sanae Takaichi, seeking a stronger mandate, has campaigned on a platform of aggressive fiscal expansion—dubbed by some as "Abenomics 2.0." Her pledges, including a potential two-year suspension of the consumption tax on food, have spooked bond markets. Investors fear these measures could worsen Japan's debt-to-GDP ratio, which already exceeds **260%**. **Bond Yields and Policy Divergence** The anxiety over Japan’s fiscal health has triggered a sell-off in Japanese Government Bonds (JGBs). The yield on the benchmark 10-year JGB has spiked to **2.38%**, a level not seen in decades, while the 40-year yield has surpassed **4.20%**. This sharply rising yield curve complicates the Bank of Japan's (BOJ) path toward monetary normalization. While the BOJ kept interest rates unchanged at its January 23 meeting, the central bank remains under intense pressure. Governor Kazuo Ueda has signaled a willingness to hike rates if inflation persists, but the political necessity of supporting the economy ahead of the election has forced a temporary pause. This hesitation is widening the perceived policy gap between Japan and the United States, further undermining the Yen. **Dollar Finds Footing** Conversely, the US Dollar is finding renewed support. The Dollar Index (DXY) is holding firm around **97.63**, recovering from recent lows. Bullish sentiment has been fueled by robust economic data, specifically the ISM Manufacturing PMI, which climbed to **52.6** in January, signaling the first expansion in the sector in over a year. Political developments in the US are also influencing the greenback. The nomination of Kevin Warsh as the next Federal Reserve Chair has introduced a hawkish tilt to long-term expectations. Markets view Warsh as vigilant on inflation, potentially signaling a slower pace of future rate cuts compared to the current trajectory. This perception is bolstering the Dollar’s yield advantage over the Yen. **Intervention Risks Loom** As the Yen weakens toward the **157.00** handle, the threat of currency intervention is rising. Finance Minister Satsuki Katayama has stated that Japan has "free hands" to address excessive volatility. Market participants are on high alert for sudden moves, remembering the joint interventions of 2022 and 2024. However, until the election results confirm the composition of the next government and its fiscal direction, the path of least resistance for the Yen appears to be lower. The immediate focus remains on Sunday’s ballot box, which will likely determine whether Japan doubles down on stimulus or pivots toward fiscal discipline. ... [Japan's February Election Stakes](https://www.youtube.com/watch?v=AWFA_7wvQLw) ... This video provides essential context on Prime Minister Takaichi's strategy and the political landscape driving the current market volatility ahead of the February 8 vote. http://googleusercontent.com/youtube_content/0