USD/JPY Ticks Lower as Yen Struggles to Hold Intervention Gains

The Japanese Yen (JPY) is experiencing some trouble maintaining its gains from last week's US-Japan coordinated intervention. The USD/JPY pair has ticked lower against the US Dollar, trimming its appreciation by a few pips shy of 158.00. This comes despite broad-based weakness in the US Dollar.

Rabobank analysts note that the cabinet approved a plan to cut sales tax on food for two years and is planning handouts to lower-income households in response to high living costs weighing on PM Takaichi's popularity. However, this unfunded tax plan has drawn criticism from both opposition and ruling LDP members.

The real test of the policy mix may be the currency itself, with investors likely judging its credibility through the Yen's performance. The Japanese Ministry of Finance and US Treasury intervention was an attempt to prop up the Yen, but it remains supported by a weak US Dollar.