USD/JPY gathers strength to near 147.50 amid tariff uncertainty

• USD/JPY strengthens to around 147.55 in Tuesday’s Asian session. 

• Japan's PM vows to stay on even as his ruling coalition is certain to lose control of the upper house in Sunday's election. 

• Investors will closely monitor the developments surrounding US-Japan trade talks.

The USD/JPY pair attracts some buyers near 147.55 during the Asian trading hours on Tuesday. The Japanese Yen (JPY) weakens against the US dollar (USD) due to political uncertainty and rising concerns over the direction of future fiscal policy in Japan.  

Japanese Prime Minister Shigeru Ishiba has vowed to remain in office, despite exit polls showing that his ruling Liberal Democratic Party (LDP) is certain to lose control of the upper house in Sunday's election. David Chao of Invesco said that the outcome of Japan's upper-house election "was largely expected by the markets." Chao further stated that "all eyes are very much on the trade deal now between Japan and the US."  

Traders will shift their attention to the US-Japan trade talks. Japan's chief tariff negotiator, Ryosei Akazawa, said on Monday that he will aim for some kind of trade agreement with the US by August 1. Any signs. Political pressure in Japan, along with the renewed trade tensions, could undermine the JPY and act as a tailwind for the pair in the near term. 

Nonetheless, the cautious stance from the US Federal Reserve (Fed) might drag the Greenback lower. Fed Governor Christopher Waller acknowledged that while the labor market remains stable overall, conditions in the private sector are less robust. 

Waller expressed support for a potential rate cut in July, adding that the Fed shouldn't "wait until the labor market deteriorates before we cut the policy rate."Markets are now pricing in nearly a 59% odds of a rate cut by the US central bank in September, according to the CME FedWatch tool.