- The Japanese Yen attracts some buyers following the release of a strong Tokyo CPI print.
- The BoJ’s hawkish stance and the risk-off mood further underpin the safe-haven JPY.
- The US PCE Price Index due later this Friday should provide fresh impetus to USD/JPY.
The Japanese Yen (JPY) struggles to capitalize on a modest Asian session uptick led by strong consumer inflation data from Tokyo (Japan’s capital city), which keeps the door open for more interest rate hikes by the Bank of Japan (BoJ). Moreover, the BoJ Summary of Opinions indicated that a rate hike is still on the table if the economy and prices move in line with the forecast. The JPY bulls, however, seem reluctant to place aggressive bets amid worries that US President Donald Trump’s auto tariffs could impact key domestic exports.
This, along with a modest US Dollar (USD) uptick, keeps the USD/JPY pair well within striking distance of a nearly four-week top. Any meaningful USD appreciation, however, seems elusive in the wake of bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon. This marks a big divergence in comparison to hawkish BoJ expectations, which should continue to offer some support to the lower-yielding JPY. Traders now look forward to the US Personal Consumption Expenditure (PCE) Price Index for a fresh impetus.
Japanese Yen sticks to strong Tokyo CPI-led gains, bulls lack conviction amid trade-related worries
- US President Donald Trump on Wednesday unveiled a 25% tariff on imported cars and light trucks to take effect on April 3. This fuels concerns that the levies would have a far-reaching impact on Japan’s auto industry, which accounts for roughly 3% of gross domestic product.
- Data released earlier this Friday showed that the headline Consumer Price Index (CPI) in Tokyo rose 2.9% in March from 2.8% previous. Moreover, Tokyo Core CPI, which excludes volatile fresh food prices, climbed to 2.4% during the reported month from 2.2% in February.
- Adding to this, a core reading that excludes both volatile fresh food and energy prices grew from 1.9% in the prior month to 2.2% in March. This is now above the Bank of Japan’s annual 2% target and backs the case for further interest rate hikes by the Japanese central bank.
- BoJ Summary of Opinions from the March meeting revealed a consensus to continue raising rates if the economy and prices move in line with the forecast. The board, however, viewed that the policy must be kept steady for the time being as the downside risks to the economy have heightened due to the US tariff policy.
- The global risk sentiment took a hit in reaction to Trump’s auto tariffs and worries that reciprocal tariffs next week will dent US growth. This overshadowed an upward revision of the US Q4 GDP, which showed that the economy grew at a 2.4% annualized pace vs 2.3% in the previous estimate.
- Richmond President Thomas Barkin warned on Thursday that the economic uncertainty driven by the Trump administration’s trade policy could dampen consumer and business spending, and will force the central bank into a wait-and-see approach rather than the proactive stance most investors are hoping for.
- Boston Fed President Susan Collins noted that the US central bank’s challenge at this point is to choose between maintaining a tight policy stance or trying to run ahead of data that might be souring in the future. Given the outlook, Collins expects the Fed to hold rates steady for longer.
- Investors now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index, which could offer fresh cues about the Fed’s future interest rate-cut path. This, in turn, will drive the US Dollar and provide some meaningful impetus to the USD/JPY pair.
USD/JPY seems poised to prolong over two-week-old uptrend while above the 150.00 psychological mark
From a technical perspective, the intraday pullback from the vicinity of the monthly peak warrants caution before placing fresh bullish bets around the USD/JPY pair and positioning for further gains. Meanwhile, oscillators on the daily chart have just started gaining positive traction and support prospects for the emergence of some dip-buying near the 150.00 psychological mark. Some follow-through selling below the 149.85-149.80 region, however, would negate the positive bias and drag spot prices to the 149.25 support zone en route to the 149.00 round figure and the next relevant support near the 148.65 region.
On the flip side, a move beyond the monthly peak, around the 151.30 area, might confront some resistance near a technically significant 200-day Simple Moving Average (SMA), currently pegged near the 151.65 region. A sustained strength beyond the latter will be seen as a fresh trigger for bulls and allow the USD/JPY pair to reclaim the 152.00 mark. The positive momentum could extend further to the 152.45-152.50 region before spot prices aim to challenge the 100-day SMA, around the 153.00 round figure.
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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