USD/JPY climbs back to its highest level in more than a year at 159.00 as markets await the US CPI data

USD/JPY Approaches 159.00 Amid Political Developments in Japan

During Tuesday's European session, the USD/JPY currency pair once again reached the 159.00 mark, its highest level in a year and a half. The Japanese Yen continues to weaken, largely influenced by renewed speculation about an early general election, following recent signals from Prime Minister Sanae Takaichi.

Last Friday, Hirofumi Yoshimura, head of the Japan Innovation Party, shared with NHK that after meeting with Prime Minister Takaichi, he sensed a shift in her perspective regarding the timing of the next election.

Earlier today, Minoru Kiuchi, Japan’s economy minister, emphasized the importance of swiftly passing the fiscal budget for 2026 through parliament.

Analysts believe that Tokyo is targeting a substantial fiscal package to stimulate economic growth. Such a move could delay the Bank of Japan’s efforts to normalize its monetary policy in the short term.

US Dollar Strengthens Ahead of Key Inflation Data

Meanwhile, the US Dollar is showing slight gains as investors await the release of December’s Consumer Price Index (CPI) data from the United States, scheduled for 13:30 GMT. However, market watchers anticipate that the inflation figures will have a muted effect on the Federal Reserve’s policy outlook, as officials remain more focused on potential employment challenges.

Core inflation in the US—which excludes the more unpredictable food and energy categories—is projected to have increased to 2.7% year-over-year in December, up from 2.6% in November. The overall inflation rate is also expected to hold steady at 2.7%. On a monthly basis, both the headline and core CPI are forecast to rise by 0.3%.