As the US congress postures we see falling Asian stocks and the dollar. Countries such as Japan have prospered over the years due to strong exports, especially to the USA. Japan makes very competitive products. Japan also pursues a monetary policy of supporting the value of the US dollar. Japan banks and investors buy US dollar, US treasury bills, US stocks, and other US assets. A Japanese investor may be pursuing a Yen carry trade simply to take advantage of higher interest rates outside of Japan. The Japanese central bank may be supporting the dollar as a direct extension of Japanese monetary policy to keep Japanese products competitive in international markets. Both actions serve to keep the dollar stronger than it would otherwise be and to keep the Yen priced lower than it would otherwise be.
