- The Japanese Yen remains depressed as trade uncertainties temper BoJ rate hike bets.
- The JPY bulls fail to gain any respite from a broadly weaker USD and the risk-off impulse.
- The fundamental backdrop backs the case for a further appreciating move for USD/JPY.
The Japanese Yen (JPY) retains a negative bias through the Asian session on Tuesday amid concerns that US President Donald Trump’s trade tariffs would complicate the Bank of Japan’s (BoJ) path to normalising monetary policy. This, in turn, assists the USD/JPY pair to hold steady above the 146.00 round figure, close to over a two-week high despite renewed US Dollar (USD) selling bias.
Meanwhile, concerns about the economic impact of Trump’s tariffs and geopolitical risks stemming from fresh conflicts in the Middle East temper investors’ appetite for riskier assets. This is evident from a sea of red across the global equity markets, which is holding back traders from placing aggressive bearish bets around the safe-haven JPY and acting as a headwind for the USD/JPY pair.
Japanese Yen bears have the upper hand amid trade jitters, reduced BoJ rate hike bets
- US President Donald Trump released the first batch of letters outlining higher trade tariffs against a slew of major economies and imposed 25% levy on Japan. Trump, however, extended the deadline for the imposition of new tariffs to August 1, leaving the door open for more trade negotiations.
- Japanese Prime Minister Shigeru Ishiba said early this Tuesday that the US had proposed to continue talks until the new August 1 deadline. Japan hasn’t been able to reach an agreement with the US because the country kept defending what needs to be defended, Ishiba added further.
- Government data released on Monday showed that the growth in Japan’s nominal wages decelerated for the third straight month in May 2025 and inflation-adjusted real wages posted the steepest decline in 20 months. This backs the case for the Bank of Japan’s caution in the near term.
- Investors grew wary over the potential economic impact of Trump’s reciprocal trade tariffs, triggering a fresh wave of the global risk-aversion trade. This could limit losses for the safe-haven JPY, which, along with the emergence of fresh US Dollar selling, should cap the USD/JPY pair.
- Against the backdrop of a strong US Nonfarm Payrolls report on Friday, expectations that Trump’s tariffs would underpin US inflation in the coming months might force the Federal Reserve to keep interest rates steady. This, in turn, favors the USD bulls ahead of FOMC minutes on Wednesday.
USD/JPY could extend the positive momentum and aim to reclaim the 147.00 mark
From a technical perspective, the USD/JPY pair looks to build on the momentum beyond the 100-day Simple Moving Average (SMA). Given that oscillators on the daily chart have been gaining positive traction, some follow-through buying beyond the Asian session peak, around the 146.45 region, should allow spot prices to reclaim the 147.00 round figure. The momentum could extend further towards the 147.60 intermediate hurdle en route to the June monthly swing high, around the 148.00 mark.
On the flip side, corrective pullbacks might now find some support around the 145.65-145.60 horizontal zone. Any further slide could be seen as a buying opportunity and remain limited near the 145.00 psychological mark. The latter should act as a pivotal point, which if broken decisively could drag the USD/JPY pair to the next relevant support near the 144.35-144.30 area en route to the 144.00 round figure.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Source: https://www.fxstreet.com/news/japanese-yen-weakens-as-trade-uncertainties-temper-boj-rate-hike-bets-202507080222