The USD/JPY may be heading much higher

Political appointments weigh on the yen

The USD/JPY is rising to 156.70 after Prime Minister Takaichi nominated two new members to the Bank of Japan, who are seen by the markets as economic reflationists. This has again worried the market about the fiscal policy that may follow the new government, leading to a weakening of the yen.

Break above short term downtrend

It also means the USD/JPY is now rising above a downtrend that briefly formed over the past couple of weeks, extending from the 159 FX rate on 23 January. The next level of resistance for USD/JPY may be at 157.50, but this raises questions about whether USD/JPY will challenge the recent highs around 158 to 159 that followed the Bank of Japan rate decision.

September trend back in focus

Given this rise in USD/JPY, it would seem that the recent strength following the Bank of Japan meeting was nothing more than a 50% retracement of the trend established in the middle of September.

Intervention risk increases near 159 to 160

It is also likely to increase the risk of government intervention in the FX market, because the 159 to 160 region on USD/JPY has been an area that has triggered intervention warnings, with the last "rate check" at the end of January.

If USD/JPY continues to rise, the odds of intervention would seem to increase, and at this point the market may not even fear such a move if it believes that fiscal policy warrants a weaker yen.

Source: TradingView, 26 February 2026