USD/JPY Under Pressure as Japan Q4 GDP Surges to 1.3%, Geopolitical Risks Loom

USD/JPY faces downward pressure following a significant upward revision to Japan's fourth-quarter GDP, which was adjusted to 1.3% annualized growth from an initial estimate of just 0.2%. The revision was driven by robust capital expenditure, which rose 1.3% — the fastest pace in a year — while private consumption was upgraded to 0.3% growth, signaling improving domestic demand. The stronger-than-expected economic performance bolsters the case for the Bank of Japan to continue its policy normalization path, potentially supporting the yen. However, the outlook is complicated by rising geopolitical tensions related to Iran, which threaten to push energy prices higher — a headwind for energy-import-dependent Japan. Notably, household spending fell 1.0% year-on-year in January, suggesting consumer resilience remains uneven. Traders should watch for near-term yen strength on the GDP beat, but escalating Middle East risks could limit gains by widening Japan's trade deficit through elevated oil costs. The mixed picture creates a tug-of-war for JPY crosses heading into the week.