USD/JPY slides as US shutdown fears boost Yen’s safe-haven appeal

The Japanese Yen (JPY) gains traction against the US Dollar (USD) on Tuesday, with USD/JPY extending losses for a third straight day as the looming United States (US) government shutdown weighs on the Greenback and bolsters safe-haven demand for the Yen. At the time of writing, the pair is trading near 147.85, down nearly 0.5% on the day.

Investors largely shrugged off Japan’s weak economic activity data released earlier in the day, instead turning their attention to the political gridlock in Washington. US President Donald Trump, speaking at the White House on Tuesday, warned that “we’ll probably have a shutdown” and said his party “can cut benefits” as part of spending negotiations, adding that “Democrats are taking a risk” by resisting his proposals.

Chicago Fed President Austan Goolsbee said on Tuesday that short government shutdowns have little impact on the economy, but cautioned that the overall effect depends on the breadth and duration of the shutdown.

The remarks came as a Tuesday midnight deadline looms, leaving the government on track for a potential shutdown from Wednesday unless lawmakers strike a last-minute deal.

Beyond the shutdown debate, Goolsbee said the US labor market remains “pretty steady,” noting that while payroll growth is slowing, other job indicators have stayed broadly stable. He also warned that the country “seems to be headed into a new wave of tariffs,” adding that he hopes these measures prove to be a one-time, moderate price increase. Goolsbee cautioned that if inflation proves more persistent, it would pose a difficult scenario for the Federal Reserve.

Across the Pacific, US macro releases offered limited support to the Dollar. The Conference Board’s Consumer Confidence Index dropped to 94.2 in September from a revised 97.8 in August, while JOLTS Job Openings for August edged up to 7.23 million from 7.21 million in July, broadly in line with expectations.

Looking ahead, focus shifts to upcoming economic data from both sides of the Pacific. In Japan, the third-quarter Tankan survey is due on Wednesday, while in the United States, attention turns to the ADP Employment Change report along with S&P Global’s and ISM Manufacturing Purchasing Managers’ Index (PMI) readings, also scheduled for Wednesday.