USD/JPY drops as Yen strengthens on safe-haven flows amid risk-off sentiment

USD/JPY has declined to 156.20, falling 0.5% as the Japanese Yen attracts safe-haven demand amid growing market uncertainty heading into year-end. The Yen's strength comes despite the Bank of Japan maintaining its dovish stance, with policy divergence between the BoJ and other major central banks remaining wide. Meanwhile, GBP/USD has risen 0.4% to 1.2580 following better-than-expected UK GDP data showing 0.3% quarterly growth. German business sentiment for 2026 has deteriorated, with the Ifo Business Climate Index suggesting continued economic headwinds for Europe's largest economy. Technical indicators show USD/JPY approaching key support at 156.00, with a break below potentially accelerating declines toward 155.50. The combination of thin holiday liquidity and safe-haven flows could continue supporting the Yen, while traders remain cautious about positioning ahead of the new year.