The Japanese Yen (JPY) surged across the board following the release of robust fourth-quarter Gross Domestic Product (GDP) data, which exceeded expectations and reinforced market speculation that the Bank of Japan (BoJ) will continue raising interest rates. Signs of broadening inflationary pressure in Japan further bolstered the yen’s strength.
In addition to domestic economic momentum, optimism over a potential delay in U.S. President Donald Trump’s reciprocal tariffs and a narrowing U.S.-Japan interest rate differential provided additional support to the lower-yielding JPY. Meanwhile, the U.S. Dollar (USD) remained weak, hovering near a two-month low reached on Friday. This pushed the USD/JPY pair lower for the third consecutive day, trading around the 152.75 level during the Asian session.
Japanese Yen Bulls Maintain Control Amid BoJ Rate Hike Bets
Fresh data released on Monday showed Japan’s economy grew by 0.7% in the October-December quarter, outpacing the previous quarter’s 0.4% expansion. On an annualized basis, growth accelerated to 2.8%, up from a revised 1.7% in the third quarter. These figures reinforce the BoJ’s stance on tightening monetary policy to manage inflationary pressures.
Japan’s Economy Minister Ryosei Akazawa expressed confidence in a modest recovery but urged caution over external risks. Meanwhile, Tokyo-based Kyodo News reported that Japan had formally requested an exemption from Trump’s proposed 25% tariffs on steel and aluminum, which follow his directive to develop reciprocal tariffs on nations imposing taxes on U.S. imports.
Weak US Data Weighs on the Dollar
The U.S. Dollar’s struggles deepened after disappointing Retail Sales data released on Friday. The 0.9% decline in January retail sales significantly missed market expectations of a 0.1% drop, following an upward revision of December’s figure to 0.7% from 0.4%.
Geopolitical developments also influenced market sentiment. U.S. Secretary of State Marco Rubio signaled that upcoming discussions with Russian President Vladimir Putin could determine Russia’s seriousness about peace negotiations. President Trump echoed similar sentiments, expressing optimism about an imminent meeting with Putin to address the ongoing war in Ukraine.
USD/JPY Technical Outlook
The USD/JPY pair remains vulnerable below the 200-day Simple Moving Average (SMA) around 152.70. Immediate support is seen at 151.45-151.40, followed by 150.95-150.90 and the psychological 150.00 level. A sustained drop could push the pair toward 149.60-149.55, the 149.00 threshold, and a December 2024 low of 148.65.
On the upside, any significant recovery above 152.00 faces resistance at 152.70 (200-day SMA), followed by 153.15 (100-day SMA). A decisive breakout could trigger a rally beyond 154.00, targeting the 154.45-154.50 supply zone and last week’s high of 154.75-154.80.
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