USD/JPY steady near 144.75 as Yen rally stalls, US-Japan trade talks in focus
- Japanese Yen posts gains in five of the last six days against the US Dollar.
- USD/JPY stabilizes after falling to 144.09 in early Asian hours.
- Tokyo pushes back on US tariff pressure ahead of key trade talks.
The Japanese Yen (JPY) continues to firm against the US Dollar (USD) on Tuesday, marking the second consecutive day of gains amid broad USD weakness, although the USD/JPY pair is trading flat near 144.75 in American hours. The pair dipped to an intraday low of 144.09 during early Asian trading hours before bouncing back during the European session.
In contrast, the US Dollar Index (DXY), which measures the USD against a basket of six major currencies, remains subdued for the second day as sentiment weakened following Moody’s downgrade of the US credit rating from Aaa to Aa1.
Meanwhile, traders remain cautious ahead of renewed trade negotiations between Japan and the United States (US), which are set to resume in Washington later this week. Japanese trade minister Ryosei Akazawa is expected to attend the third round of ministerial-level talks, with US Trade Representative Jamieson Greer also scheduled to participate.
At a press conference on Tuesday, Akazawa reiterated Japan’s firm stance on tariffs:
“The slew of US tariffs, including reciprocal tariffs as well as those on automobiles, car parts, steel, and aluminium, are regrettable. There's no change to our stance of seeking a review, which is to say an elimination, of them,” he said.
While US officials are reportedly pressing Japan for an early conclusion to the talks, suggesting that striking a deal sooner would give Tokyo an advantage over other countries still negotiating.
Looking ahead, market participants will keep a close eye on Japan’s upcoming economic data, which could influence both market sentiment and monetary policy expectations. The Ministry of Finance will release trade figures for April on Wednesday, providing a snapshot of how Japan’s exports and imports are holding up amid ongoing global trade tensions and softer demand from key partners like China and the US. Then, on late Thursday, attention will turn to Japan’s inflation picture, with the April Consumer Price Index (CPI).
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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