Recent significant developments in economics and energy indicate that Japan's economy, global energy supply, and international financial markets are being simultaneously affected by wage trends and an escalating Middle East conflict. Data from Japan's Ministry of Health, Labour and Welfare shows that in January 2026, the nation's real wages—reflecting purchasing power after adjusting for inflation—rose by 1.4% year-on-year. This marks the first instance of positive growth in 13 months, following consistent year-on-year declines throughout 2025, which resulted in an overall annual decline of approximately 1.3%. Meanwhile, Japan's nominal wages—defined as total cash earnings including base pay, overtime, and bonuses—increased by 3.0% year-on-year, reaching an average monthly figure of 301,314 yen (approximately US$1,900, using an exchange rate of ¥157.65 to US$1). This growth represents the fastest pace in six months and is higher than the 2.4% increase recorded in December 2025. Concurrently, the rapidly escalating Middle East situation is impacting Japan's energy supply and global energy markets. As military actions by the US and Israel against Iran expand, shipping through the Strait of Hormuz—a channel essential for around 20% of the world's seaborne oil and liquefied natural gas (LNG) trade—has nearly ground to a halt. Japan faces a significantly heightened energy supply risk, as it depends on the Middle East for about 95% of its oil imports. Against this backdrop, Tamaki Yuichiro, head of Japan's opposition Constitutional Democratic Party, has called on the government to resume full operations at all nuclear reactors meeting necessary safety conditions. He argues this is needed to alleviate pressure from rising energy prices, warning that significant electricity price hikes will be unavoidable if Japan fails to utilize nuclear power—a low-carbon energy source with lower dependence on foreign supply. Prime Minister Takaichi has long been viewed as a supporter of nuclear power development, while public opinion in Japan—which had remained subdued in the aftermath of the Fukushima Daiichi nuclear accident—has gradually shifted in recent years toward supporting limited reactor restarts.

According to the CME FedWatch tool, the market places a high degree of certainty—97.3%—on the Federal Reserve maintaining the current interest rate in March 2026. This follows the Fed's recent reduction of its target rate to the 3.5% - 3.75% range. Concurrently, consensus forecasts for 2026 suggest the US dollar will be in a consolidating downtrend, with the Dollar Index potentially depreciating by approximately 3% from current levels by year-end. Geopolitical tensions, now in their 11th day, continue to dominate global market sentiment. Escalating airstrikes and retaliatory attacks between the US, Israel, and Iran have disrupted oil shipments through the Strait of Hormuz, amplifying volatility in foreign exchange markets. Signs of a softening US economy are also emerging. The latest labor market report showed a contraction in employment and a rising unemployment rate, raising concerns about stagflation and further complicating the Fed's task of balancing inflation risks against a cooling economy. Market participants are closely awaiting Wednesday's release of the US Consumer Price Index (CPI) data for February, which is expected to provide crucial insights into the future path of US monetary policy and the direction of the USDJPY.

In the 1D timeframe, the Bollinger Bands are widening upward, with moving averages diverging higher. The price is trending upward along the EMA12 and the upper Bollinger Band. Following the MACD golden cross, the MACD line and signal line have risen above the zero line, signaling a return to bullish territory. After the small bullish candle closed last Friday, there is a high probability of retesting previous highs and key resistance levels at 159.4 and 160. The RSI reading of 61 indicates that market participants are predominantly engaged in buying activity. In the 4H timeframe, the Bollinger Bands are narrowing, and moving averages are flattening, with price oscillating near the EMA12 and the middle Bollinger Band, suggesting a potential trend reversal may be imminent. Currently, the market is in an accelerated uptrend, with MACD's MACD line and signal line operating above zero line, maintaining an overall bullish bias. The RSI at 52 reflects a cautious, wait-and-see sentiment among investors. The strategy remains to buy on dips.

Trading Direction: Buy

Entry Price: 157.8

Target Price: 162

Stop Loss: 155

Support: 154, 152, 149.5

Resistance: 160, 161, 162