Chart of the Week: JPY bearish breakdown and Takachi trade.

• Volatility driven by policy crosscurrents: USD/JPY has swung sharply since mid-January as traders weighed fears of US–Japan FX intervention against the so-called “Takaichi trade,” which initially pointed to JPY weakness from fierce fiscal expansion.
• Weaker-yen narrative fading: Despite Takaichi’s election landslide, the yen strengthened, with USD/JPY posting a 2.9% weekly drop. Her pledge to avoid new bond issuance eased concerns over debt-funded stimulus and reversed expected downside pressure on the JPY.
• Bearish USD/JPY technical setup building: A weekly bearish engulfing pattern and weakening RSI momentum signal downside risk, with a break below 152.20 exposing 151.20 and 150.30/149.90, unless price reclaims 154.65 resistance.

The price actions of the USD/JPY have gyrated in vicious swings in both directions since 14 January 2026, as market participants toggled between fears of US-Japan joint FX intervention to strengthen the Japanese yen and the “Takaichi trade” effects, where Japanese Prime Minister Takaichi’s bold expansionary fiscal policies may create an obstacle for the Bank of Japan (BoJ) to maintain its current gradual tightening monetary policy stance, in turn, weakening the JPY.

The renewed “Takaichi trade” for a weaker Japanese yen did not materialize after Japan's PM Takaichi’s coalition party won a landslide victory with a super majority of seats in the recent lower house snap election held on 8 February 2026.

In contrast, the Japanese yen strengthened thereafter. On Monday, 9 February, at the opening of the Asian session, the USD/JPY spiked 42 pips to an intraday high of 157.66, then traded lower throughout the session.

Overall, the USD/JPY recorded a weekly loss of 2.9% for the week of 9 February, its worst weekly decline in almost two months. Based on a five-day rolling performance as of 13 February 2026, the USD/JPY was the weakest major dollar pair with a loss of 3.1%, worse than the US Dollar Index return of -0.9% over the same period (see Fig. 1).

Takaichi reaffirmed her administration’s commitment to a “prudent and sustainable” expansionary fiscal stance, stressing that no new government bonds will be issued to finance the spending gap.

Instead, the package will be funded through targeted subsidies, special tax measures, and non-tax revenues. This approach helped reverse the initially expected downside pressure on the JPY, as fears of aggressive debt-funded stimulus eased.

Let's look at the technical chart of USD/JPY to decipher its medium-term (multi-week) trend.

The price actions of the USD/JPY have formed a weekly “Bearish Engulfing” candlestick, a bearish reversal pattern, and its 4-hour RSI momentum indicator has broken below a former ascending support, which suggests a bearish momentum condition (see Fig. 2).

These observations suggest that the current downtrend from the 9 February 2026 high of 156.15 may extend further.

Watch the 154.65 key medium-term pivotal resistance, and a break below 152.20 intermediate support exposes the medium-term supports at 151.20 and 150.30/149.90 (also the 200-day moving average) next.

On the flipside, a clearance above 154.65 invalidates the bearish tone for the next medium-term resistances to come in at 155.50 and 156.60 (also the upper boundary of the medium-term descending channel from 14 January 2026 high).

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