USD/JPY hesitates above 144.50 with investors awaiting news about tariffs
- The Dollar treads water against the Yen in a quiet market session.
- Investors are looking from the sidelines, awaiting news from the US-China meeting.
- Dovish comments from BoJ Governor Ueda have called rate hike expectations into question.
The US Dollar is trading without a clear bias, for the second consecutive day, against the Japanese Yen. The Doji candles in the daily chart highlight investors’ reluctance to place directional bets as US and Chinese representatives negotiate a trade deal.
Positive comments from US President Trump and Economic Council Director, Kevin Hassett, are keeping hopes of a satisfactory outcome alive, but traders are looking from the sidelines, awaiting news of more concrete advances.
The world’s two largest economies are looking to return to the spirit og last week’s meeting in Geneva, which led to a significant reduction of their reciprocal tariffs. This time, however, a deal requires concessions in thorny aspects, such as rare earths trade or chip exports.
In Japan, BOJ Governour Ueda affirmed that the Bank will hike rates again when they are confident that inflation is nearing 2%, which casts doubt about further monetary tightening in the coming months, and added bearish pressure on the Japanese Yen.
These comments have offset investors’ optimism about a better-than-expected Japanese Gross Domestic Product remained flat in Q1 following a 0.2% contraction in the previous quarter, and beating expectations of another 0.2% economic slowdown.
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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