21.01.202602:17:15UTC+00Yen Holds Steady Amid Fiscal Worries

The Japanese yen maintained its position at approximately 158 per dollar on Wednesday, although it faced downward pressure following Prime Minister Sanae Takaichi's proposal to reduce the 8% sales tax on food. This announcement sparked concerns regarding the fiscal outlook, as it remains uncertain how the government plans to compensate for the potential revenue shortfall. Earlier in the week, Prime Minister Takaichi declared her intention to dissolve parliament on Friday and call a snap general election for February 8, aiming to garner support for her proposed spending initiatives and wider policies. Meanwhile, investors are closely monitoring the Bank of Japan's upcoming policy meeting later this week, where the consensus is that interest rates will remain unchanged after a December increase. Traders continue to be vigilant about potential interventions in the yen market amid apprehensions over the effects of a weaker currency on domestic inflation. Nevertheless, the yen received some support due to a softer dollar, as escalating tensions between the United States and Europe over Greenland undermined confidence in US assets.