2026.02.0602:35:57UTC+00Yen Set for Sharp Weekly Drop

The Japanese yen stabilized at approximately 156.8 against the dollar on Friday, although it remained on track to decline by over 1% for the week as investors braced for this weekend’s lower house elections. The yen faced downward pressure due to expectations that Prime Minister Sanae Takaichi will secure voter support for increased government spending and possible tax reductions, sparking concerns over Japan's fiscal stability. Market sentiment was further dampened by uncertainties about how the government plans to finance its ambitious objectives and counterbalance potential revenue shortfalls. Investors are also anticipating Japan’s fourth-quarter GDP report next week, with forecasts of a recovery following a significant contraction in the previous quarter. Prime Minister Takaichi recently pointed out that a weaker yen might benefit exporters, later clarifying that her remarks intended to advocate for an economy adaptable to currency fluctuations. In late January, the yen had surged by up to 4.5% amid speculation of a potential US-Japan joint currency intervention, but it has since relinquished more than half of those gains.