**Yen Strengthens as Market Reassesses U.S. Credit Risk and BoJ Signals Tightening**

In early Monday trading across Asia, the U.S. dollar fell below the key psychological level of 145 yen, sliding as low as 144.70 — its weakest level since November last year. The move highlights a growing appetite for the yen, driven by two major shifts: renewed concerns over U.S. fiscal health and a potential pivot in Japan’s rate policy.

Moody’s recent downgrade of the U.S. sovereign credit rating from Aaa to Aa1 sparked the initial reaction. Citing widening federal deficits, stagnant structural reform, and political inertia, the downgrade forced investors to reassess the safety of holding dollar assets. Projections suggest the U.S. deficit could rise from 6.4% to 9% of GDP over the next decade. If Trump-era tax cuts are extended, another $4 trillion may be added to the debt burden. While Treasury Secretary Janet Yellen downplayed the outlook, markets reacted more cautiously — the dollar index slipped below 100.3, marking a more than 4% drop from last month’s peak.

The downgrade served as a reminder: despite a recovering economy, the U.S. fiscal trajectory remains fragile. Fixed commitments like Social Security and Medicare continue to rise, and with high interest rates, debt servicing now consumes a growing share of federal resources. Total U.S. national debt has surpassed $36 trillion — roughly $108,000 of debt per citizen.

Meanwhile, Japan offers a stark contrast. Despite weaker-than-expected Q1 GDP — a 0.2% decline that broke a year-long growth streak — Japan is drawing investor attention due to a potential shift in its longstanding ultra-loose monetary policy. Bank of Japan Governor Kazuo Ueda has signaled that if growth remains stable, further rate hikes are on the table. That prospect has fueled demand for yen assets, especially given the yen’s traditional role as a safe haven during global uncertainty.

While other Asian currencies have generally weakened in recent sessions, the yen has stood out. Beyond domestic policy signals, external factors — including growing U.S. fiscal concerns and falling Treasury yields — are giving the yen additional lift at the dollar’s expense.

Looking ahead, markets will be watching the Bank of Japan carefully. A clear move toward tightening could drive further yen appreciation, especially in a climate of waning risk appetite and rising geopolitical tensions. On the U.S. side, additional fiscal stimulus or shifts in tax policy could further erode dollar confidence.

Technically, if USD/JPY remains below 145, the pair could test the 142–143 range. The yen’s five-day winning streak shows capital is rotating into safer assets, with investors adopting a more cautious stance. With monetary and fiscal uncertainty running high, the tug-of-war between the dollar and the yen is far from over.