USD/JPY snaps two-day downtrend to regain 115.00 as Japan diplomat discusses weak yen

• USD/JPY picks up bids to refresh intraday high, up for the first time in three days.
• Japan’s Vice FinMin Kanada said weak yen has merits and demerits for economy.
• Japan Unemployment Rate eased, Job/Applicants Ratio rises in December.
• Market sentiment stays sluggish with steady US Treasury yields and downbeat stock futures, US ISM Manufacturing PMI eyed.

USD/JPY consolidates recent losses around 115.15 during the initial hours of Tokyo open on Tuesday.

The risk barometer pair’s recent recovery could be linked to the firmer US Treasury yields and downbeat equities, not to forget mixed comments from Japan’s Vice Finance Minister (FinMin) Masato Kanda. In doing so, the quote pair’s a little heed to upbeat Japan employment data for December.

That said, Japan’s Unemployment Rate dropped to 2.7% versus 2.8% forecast and prior readouts whereas the Job/Applicants Ratio rose past 1.15 previous readings to 1.16 during the stated month.

Elsewhere, Japan’s key currency diplomat Kanada said, “The boost a weak yen gives to Japan's export volumes has declined compared with the past, as manufacturers target shipments to high-end, state-of-the-art products overseas rather than compete with price cuts,” per Reuters. The diplomat adds, “The demerits of a weak yen is that it pushes up the import cost of energy and food, thereby increasing household burdens.”

It should be noted that the population in Tokyo is estimated to have registered the first fall in 26 years due to the pandemic, which in turn escalates pressure on the government even if PM Fumio Kishida rejected the calls for another virus-led state of emergency.

On a different page, the Fed policymakers refrained to openly support the expectations of a 50 basis points (bps) of a rate hike in March, which in turn triggered the US dollar pullback the previous day. Also weighed on the greenback were recently improving concerns over the Russia-Ukraine issue. “The Russian government has delivered a written response to a U.S. proposal aimed at de-escalating the Ukraine crisis,” Washington Post (WaPo) quotes Senior US Diplomat. It’s worth noting that UK PM Boris Johnson is also scheduled to visit Ukraine on Tuesday whereas US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov will also hold meetings today.

Amid these plays, US Treasury yields remain sluggish around 1.77% while the US stock futures drop at the latest. However, Japan’s Nikkei 225 rises 1.0% by the press time.

Moving on, the US ISM Manufacturing PMI for January, expected 57.5 versus 58.7 prior, will be important for immediate direction. However, major attention will be given to the Fedspeak and developments concerning Russia.

Read: ISM Manufacturing PMI January Preview: Fed policy counts on a continuing US expansion

Technical analysis

USD/JPY bears’ inability to conquer the 21-DMA level surrounding 114.85 redirects the pair towards the November 2021 peak near 115.55.