- Japan’s Yenbles is taking a short break in the midst of concerns about the economic impact of Trump’s tariffs.
- The atmosphere of risk and the expectations of the relatively Hawkian BOJ could use an optimistic tone for JPY.
- Before the decisive US NFP report is published, USD sales distortions contribute to USD/JPY limits.
The Japanese Yen (JPY) is continuing to draw safe-haven inflows during Friday’s Asian session, maintaining its position near a multi-month high against the US Dollar (USD) that it reached the day before. Persistent signs of rising inflation in Japan have led to expectations of potential further tightening by the Bank of Japan (BoJ). At the same time, concerns over the economic impact of US President Donald Trump’s broad reciprocal tariffs are dampening global risk sentiment, which in turn benefits the Yen.
These factors are largely counteracting speculation that the tougher US tariffs on Japan might prompt the BoJ to keep rates unchanged for now, thus continuing to support the JPY. Additionally, the prevailing trend of USD selling keeps the USD/JPY pair under pressure, remaining below the 146.00 threshold, which bolsters the possibility of further declines. However, traders are adopting a cautious stance, waiting for the US Nonfarm Payrolls (NFP) report before committing to new positions.
Japanese Yen Draws Safe-Haven Demand Amid Ongoing Concerns Over Trump’s Trade Tariffs
- A 25% tariff on US President Donald Trump will take effect on automobile imports as planned on Thursday, as it hits Japan’s automobile industry, which is about 3% of gross domestic product. Additionally, the bet withdrew from the Bank of Japan due to early interest income as the stricter mutual tariffs announced on Wednesday could have a negative impact on the Japanese economy.
- Thursday’s 10-year Japanese government bond returns were the biggest drop since August 5th, reaching its lowest level since February 26th. This was shown in Japanese Yen during Friday’s Asian session, indicating that the USD/JPY couple’s support would register a modest recovery from the lowest level since October the previous day.
- In the meantime, the Japanese Prime Minister said Thursday that he would not hesitate to change President Donald Trump directly and would continue to ask the US to continue to reconsider tariff measures. Regardless, the Minister of Finance warned earlier on Friday that tariffs could have a major impact on the trade system and the global economy.
- Governor Boji, Uedagawa, said Trump’s tariffs should probably put pressure on Japan and the global economy, but she repeated the BOJ that Boji would properly evaluate monetary policy in terms of sustainable achievement of the 2% inflation target. The Lieutenant Governor of Boj Shinichi nichida said the central bank would raise interest rates if underlying inflation increases.
- This is about strong numbers of inflation in Tokyo on Friday, which supports cases that tighten the BOJ even further. By contrast, retailers again cut credit costs in June and increased their Federal Reserve forecasts to cut interest rates four times this year, as Trump’s policies will cause a comprehensive trade war and a global recession.
- A dip in U.S. bonds sparked a shift to U.S. state bonds and the dollar, limiting USD/JPY recovery. Dealers await U.S. employment data before making further moves
USD/JPY May Face Further Decline If It Stays Below 146.55-146.50, or the Prior YTD Low
From a technical standpoint, the recent dip below the previous year-to-date low, around the 146.55-146.50 range, has been viewed as a new signal for USD/JPY bears. In addition, the daily chart’s oscillators remain firmly in negative territory, still far from reaching the oversold zone. This suggests that the primary direction for the pair is likely downward, supporting the potential for further declines. As such, a drop below the overnight swing low, near the 145.20-145.15 area, could open the door for a move toward the 145.00 level and the next significant support around 144.50-144.45.
On the other hand, if the pair attempts a recovery and pushes back above the 146.50-146.55 zone (the previous year-to-date low), it is likely to encounter fresh selling pressure, with resistance near the 147.00 level. However, if the pair manages to break through this resistance, a short-covering rally could lift USD/JPY to the 147.75-147.80 range, followed by the 148.00 level. A decisive break above this level could set the stage for further gains, targeting the 148.60 intermediate resistance and potentially moving toward the 149.00 level and the 149.20 zone.
