Yen softens to 158.4 as political and policy uncertainty loom

The Japanese yen edged lower to near 158.4 per dollar on Tuesday, following a bout of sharp volatility, as domestic political developments unsettled investor sentiment. Prime Minister Sanae Takaichis announcement to dissolve parliament and call a snap election on February 8 injected fresh uncertainty, with the scale of the ruling partys majority seen as pivotal for the future direction of fiscal policy. Market participants also remained cautious ahead of the Bank of Japans two-day policy meeting concluding Friday, preferring to wait for clearer guidance on the timing of the next rate increase. Even so, expectations of an eventual policy shift by the BoJ, the likelihood of official intervention to curb excessive currency weakness, and a prevailing risk-averse global backdrop may continue to provide some underlying support to the yen.

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