Japan recorded current account surpluses of 30–32 trillion yen in 2024–2025, driven by primary income from dividends and foreign investment, which offset the trade deficit. Lower energy import costs last year provided additional support to the balance sheet, creating a fundamental basis for a stronger yen over the long term.
Meanwhile, the US continues to grapple with a sizable current account deficit (around 2.9% of GDP by the end of 2025), although the situation is now showing signs of improvement.
Borrowing levels remain elevated in both economies. Japan's debt-to-GDP ratio is the highest in the world, making the country heavily reliant on capital inflows to finance its liabilities. In the US, the 2026 outlook points to an 8% increase in debt compared to previous estimates.
Sovereign credit ratings are stable (S&P: A+, Fitch: A). Analysts believe that there is little risk of an economic shock due to the large domestic investor base. However, keep in mind that Moody's downgraded the US rating last year amid rising concerns over fiscal decisions and political uncertainty. If market confidence weakens further, it could cap upside potential for the pair.
American protectionist policy has left investors in a fog, with two opposing scenarios to consider. On the one hand, import tariffs could temporarily boost the dollar by fueling inflation and supporting tighter monetary conditions. On the flip side, such restrictions weigh on Japanese exports—particularly vehicles and machinery—negatively impacting the trade balance and the yen.
If the US Consumer Price Index (CPI) jumps higher again and the Bank of Japan (BoJ) hesitates to hike interest rates—projections reaching 0.75% by the end of 2025—the USDJPY pair could test the 160.00–170.00 range.
The overall recommendation is to buy USDJPY on stubborn inflation data in America. Profits should be taken at the level of 160.00. Stop Loss could be set at 151.90.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
