Japanese Yen strengthens above 156.00 on US tariff uncertainty
- USD/JPY softens to around 156.15 in Thursday’s early Asian session.
- The US trade representative stated that the US tariff rate for some countries will increase to 15% or higher.
- BoJ’s Ueda said he will scrutinize data at its March and April meetings to decide on further hikes.
The USD/JPY pair drifts lower to near 156.15 during the early Asian session on Thursday. The US Dollar (USD) softens against the Japanese Yen (JPY) amid US tariff uncertainty. Traders brace for the release of Japan’s Tokyo Consumer Price Index (CPI) and US Producer Price Index (PPI) reports, which will be released later on Friday.
The US Supreme Court struck down US President Donald Trump’s sweeping global tariffs last week. Trump has responded by lashing out at the court and imposing a blanket 15% levy on imports.
On Wednesday, US Trade Representative Jamieson Greer stated that the US President plans to raise this rate to 15% for many countries in the coming days. This authority is limited to a 150-day window unless extended by Congress. US policy fog could exert some selling pressure on the Greenback against the JPY.
On the other hand, the Bank of Japan (BoJ) policy uncertainty could weigh on the Japanese Yen and act as a tailwind for the pair. BoJ Governor Kazuo Ueda said on Thursday that while rate hikes will continue if economic forecasts are met, the central bank will wait for data from the March and April meetings to make further decisions.
Additionally, Japanese Prime Minister Sanae Takaichi has expressed reservations about further rate hikes, citing concerns over economic impact. According to Reuters, a majority of economists expect the policy rate to reach 1.0% by the end of June 2026.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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