Japanese Yen Slides Against the US Dollar Even as Risk Aversion Eases

• USD/JPY may face downside pressure as the US Dollar loses momentum amid improving risk sentiment sparked by fresh diplomatic developments.
• Iran has reportedly received mediation proposals aimed at easing tensions with the United States, including the possibility of a 10-day ceasefire.
• Meanwhile, Japanese Prime Minister Sanae Takaichi reaffirmed her commitment to preserving market confidence and ensuring fiscal discipline in Japan’s economic strategy.

USD/JPY advanced for a fourth consecutive session, trading near 162.60 during Tuesday’s European session, though activity remained subdued with Japanese banks closed for the Marine Day holiday.

The pair’s upside may remain limited as the US Dollar struggles to build momentum amid improving market sentiment. Hopes for a reduction in geopolitical tensions emerged after Iranian officials confirmed receiving mediation proposals from international intermediaries aimed at easing the standoff with the United States, including discussions of a possible 10-day ceasefire.

According to Axios, President Donald Trump is considering two contrasting approaches: supporting a temporary ceasefire to allow the reopening of the strategically important Strait of Hormuz or joining Israel in a broader military campaign. The deliberations come as US military assets continue to be deployed across the region while diplomatic efforts remain underway.

Meanwhile, Japanese Prime Minister Sanae Takaichi reiterated the government’s commitment to preserving market confidence and maintaining fiscal discipline. She also highlighted plans to accelerate economic growth, targeting real GDP expansion above 1% and nominal growth exceeding 3% in the near term, while pursuing stronger long-term economic performance.

Investors are now looking ahead to Japan’s June National Consumer Price Index (CPI), due on Friday, for fresh clues on the Bank of Japan’s policy trajectory. Economists expect core inflation, which excludes fresh food, to increase 1.6% year-over-year, compared with 1.4% in May, reinforcing speculation over the central bank’s next policy move.