USD/JPY Pair Surges on Fiscal Woes and Rate Gap

The Japanese Yen has continued to struggle against the US Dollar, trading below 159.00 levels amid fiscal woes and a widening interest rate gap between Japan and other major economies.

In recent days, the USD/JPY pair has recovered from its lowest level since early May, reaching a one-and-a-half-week top at around 159.25-159.30 on Tuesday.

The Japanese government's fiscal year 2026 budget totals a record ¥122.3 trillion, exacerbating concerns about Japan's worsening fiscal condition and weighing heavily on the JPY.

A wide interest rate gap between Japan and other major economies continues to keep the carry trade active, further pressuring the JPY.