## Yen Drops Sharply Despite Positive Spending Data - Short-Term Correction or Long-Term Trend?

Asian trading today saw the Japanese Yen (JPY) continue to slide to its lowest level in a week as the USD/JPY pair surged well above 157.00. Although Japan's Statistics Bureau released household spending data showing a recovery with a 2.9% increase year-over-year in November, this hardly provided a boost for the JPY to weaken sharply. In reality, the Yen remains under pressure from multiple fronts amid the Bank of Japan (BoJ) tensions with bullish speculators.

### Real Wages Weak - Weakness of Positive Data

Despite signs of household spending recovery, Thursday’s data revealed a bleak picture on wages. Real wages, adjusted for inflation, have decreased for 11 consecutive months, with November recording a 2.8% decline. This reflects that inflation still outpaces wage growth, exerting continuous pressure on the JPY and the financial situation of Japanese households.

### Increasing Geopolitical Tensions - New Factor Driving JPY Weakness

Beyond internal economic challenges, China has escalated disputes with Japan by restricting exports of rare earths and magnets to Japan. This move is seen as a response to Japanese Prime Minister’s comments related to Taiwan. The ban poses significant risks to Japanese manufacturers’ supply chains, adding further downward pressure on the Yen in the short term.

### BoJ Tightening Expectations vs. Fed Easing - Interest Rate Battle

BoJ Governor Kazuo Ueda recently hinted at the possibility of continuing monetary policy tightening if economic indicators develop as forecasted. However, this expectation is overshadowed by the anticipation that the US Federal Reserve (Fed) will continue easing policy in the near future. Traders have priced in a potential Fed rate cut in March and another reduction by the end of the year. This divergence in monetary policy outlooks between the two central banks favors USD appreciation against JPY.

### USD Maintains Uptrend - Pause Before Important NFP

The US dollar has maintained its upward momentum over the past two weeks, approaching its one-month high. The strength of the USD provides additional momentum for the USD/JPY pair to rise. However, the rally appears to be temporarily paused as traders await the upcoming non-farm payroll (NFP) report for further signals on the Fed’s rate cut trajectory in the coming months.

## Technical Analysis: USD/JPY Maintains Advantage Above 100-Period SMA H4

On the 4-hour timeframe, the 100-period Simple Moving Average (SMA) is slightly higher at 156.31, indicating the uptrend remains intact. The USD/JPY pair stays firmly above this level, with the 100 SMA acting as dynamic support.

The MACD (Moving Average Convergence Divergence) indicator is above the signal line and turning positive, with the histogram expanding slightly, confirming improving momentum. The Relative Strength Index (RSI) stands at 62, reflecting strong buying pressure but not yet overbought, allowing the pair to continue higher in subsequent sessions.

If buying momentum persists, USD/JPY could test higher levels. Conversely, if a correction occurs, the 100 SMA will become a key support zone from below.