Dollar stands firm as yen jitters ahead of Japan’s high-stakes election

February 4, 2026 — The U.S. dollar held steady in global markets on Tuesday, while the Japanese yen wobbled as investors remained cautious ahead of Japan’s closely watched national election later this week. Currency traders showed limited appetite for risk as political uncertainty in Tokyo weighed on the yen, which slipped toward a two-week low against the dollar. Markets are bracing for potential policy shifts depending on the election outcome, particularly around fiscal spending and currency management. The dollar, meanwhile, remained broadly stable after Washington moved to avert a prolon

February 4, 2026 — The U.S. dollar held steady in global markets on Tuesday, while the Japanese yen wobbled as investors remained cautious ahead of Japan’s closely watched national election later this week. Currency traders showed limited appetite for risk as political uncertainty in Tokyo weighed on the yen, which slipped toward a two-week low against the dollar. Markets are bracing for potential policy shifts depending on the election outcome, particularly around fiscal spending and currency management. The dollar, meanwhile, remained broadly stable after Washington moved to avert a prolonged government shutdown, easing immediate concerns about U.S. fiscal disruption. Attention has also turned to the Federal Reserve’s policy outlook, with expectations that interest rates may stay higher for longer, supporting the greenback.

People react as Sanae Takaichi, Japan's Prime Minister and leader of the ruling Liberal Democratic Party

In Japan, election campaigning has revived debate over the weak yen’s impact on households, as rising import costs continue to fuel inflation. While exporters benefit from a softer currency, consumers face higher prices for food, fuel and daily essentials. Analysts say the yen’s near-term direction will depend on post-election signals from political leaders and any hints of intervention from Japanese authorities. Until clarity emerges, currency markets are expected to remain volatile, with investors closely watching both Tokyo and Washington for policy cues.