USD/JPY declines near 152.00 as Yen strengthens on US-Japan trade progress

• USD/JPY falls near 152.00, pressured by the strength of the Japanese Yen.
• The United States and Japan reaffirm a "strong" trade partnership between the two nations.
• Investors expect a Fed rate cut, while the BoJ is likely to keep its current policy unchanged.

USD/JPY falls sharply to around 152.15 on Tuesday at the time of writing, down 0.47% for the day, as the Japanese Yen (JPY) outperforms most of its peers. The move reflects renewed optimism over trade relations between the United States (US) and Japan, following a series of joint announcements on investment and strategic cooperation.

Earlier in the day, Tokyo detailed its $550 billion investment plan in the United States, targeting sectors such as energy, infrastructure, and automotive. Against this backdrop, US President Donald Trump praised Japanese Prime Minister Sanae Takaichi, describing US-Japanese friendship as "strong". Both leaders also signed an agreement on rare earths and critical minerals aimed at securing supply chains and reducing dependency on China.

These developments support JPY, traditionally sought in times of geopolitical uncertainty. Japanese Economy Minister Minoru Kiuchi, however, emphasized the need to maintain exchange rate stability, noting that rapid JPY fluctuations can hurt households and small businesses.

On the monetary front, markets are looking ahead to the Bank of Japan (BoJ) policy decision due Thursday, with the central bank expected to keep its benchmark rate steady at 0.50%. Investors will closely monitor Governor Kazuo Ueda's remarks for any hint of a policy shift toward normalization.

Across the Pacific, the US Dollar (USD) remains under pressure as the Federal Reserve (Fed) is widely expected to announce a 25-basis-point rate cut on Wednesday, bringing the target range down to 3.75%-4.00%.

Political uncertainty in Washington, amid the ongoing US government shutdown and President Trump's repeated criticism of Fed Chair Jerome Powell, is also undermining sentiment. In this context, USD may remain vulnerable against a JPY supported by diplomatic progress and the BoJ's cautious stance.