USD/JPY remains above 152.50, downside appears as Trump postpones reciprocal tariffs

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• USD/JPY struggled after President Trump's delay of reciprocal tariffs.

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• The US Dollar weakens as US yields decline across the curve.

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• Japan's Economy Minister Ryosei Akazawa stated that authorities will take appropriate action regarding US reciprocal tariffs.

USD/JPY remains steady after registering losses in the previous session, trading around 152.60 during the Asian hours on Friday. The pair faced challenges following US President Donald Trump’s decision to postpone the implementation of reciprocal tariffs. Additionally, the US Dollar (USD) weakens amid falling US yields across the curve, despite ongoing concerns about a global trade war. Investors now await the release of US Retail Sales data later in the day.

The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, extends its losses for the fourth successive session. The DXY trades around 107.00 with 2-year and 10-year yields on US Treasury bonds standing at 4.31% and 4.53%, respectively, at the time of writing.

Core PPI inflation in the United States (US) rose to 3.6% YoY in January, exceeding the expected 3.3% but slightly below the revised 3.7% (previously reported as 3.5%). This has reinforced expectations that the Federal Reserve (Fed) will delay rate cuts until the second half of the year. Additionally, persistently strong inflation could further support the outlook for the Fed to keep interest rates at 4.25%-4.50% for an extended period.

On Friday, Japan's Economy Minister Ryosei Akazawa stated that the authorities will respond appropriately to US reciprocal tariffs. Akazawa further stated that the weak Japanese Yen (JPY) has a variety of impacts on Japan's real economy.

The Japanese Yen (JPY) gained support following Thursday’s release of stronger-than-expected Producer Price Index (PPI) data from Japan, reinforcing expectations of further rate hikes by the Bank of Japan (BoJ). The data highlights expanding inflationary pressures in Japan, further supported by recent wage growth figures, strengthening the case for additional BoJ rate hikes.