The Japanese Yen (JPY) extends its intraday gains, reaching the highest level against the US Dollar since October 2024 during the Asian session on Wednesday. Ongoing concerns over the economic impact of US President Donald Trump’s sweeping trade tariffs continue to weigh on market sentiment, benefiting safe-haven assets like the JPY. Additionally, reports indicating that Trump has agreed to meet with Japanese officials to discuss trade have bolstered optimism about a potential US-Japan trade deal, further supporting the Yen.
The JPY’s strength is also fueled by growing expectations that the Bank of Japan (BoJ) will continue to raise interest rates in response to increasing inflationary pressures in Japan. This contrasts with market expectations for the Federal Reserve (Fed), where fears of a tariff-driven US economic slowdown are prompting bets on a series of rate cuts. These contrasting expectations have led to capital inflows into the JPY, which is seen as a lower-yielding safe-haven currency.
Despite the Yen’s gains, the USD/JPY pair found support near the mid-144.00s and briefly climbed back above the key psychological level of 145.00 in the last hour. Market participants are now awaiting the release of the Federal Open Market Committee (FOMC) meeting minutes later today for further direction, ahead of the crucial US Consumer Price Index (CPI) data on Thursday.
US Economic Fears Weigh on USD/JPY, Trade Talks Fuel Yen Strength
Rising concerns that Trump’s tariffs could drive the US and global economies into recession have intensified the sell-off in global equity markets, with the S&P 500 seeing its steepest four-day losses since the 1950s. Amid these concerns, US President Trump and Japanese Prime Minister Shigeru Ishiba have agreed to keep trade discussions open, which has sparked optimism about a potential US-Japan trade deal, lending further support to the Yen.
Japan’s Ministry of Finance, the Financial Services Agency, and the BoJ are scheduled to meet at 07:00 GMT to discuss the international financial landscape. Despite some easing of expectations for faster interest rate hikes by the BoJ, Deputy Governor Shinichi Uchida reaffirmed last Friday that the central bank will continue raising rates if inflation approaches its 2% target.
Meanwhile, the market’s focus remains on the Fed, where expectations of a slowdown due to tariffs are growing. According to the CME Group’s FedWatch Tool, there is now a more than 60% probability that the Fed will cut interest rates at its next meeting in May. The market is also pricing in a total of five rate cuts by the end of this year, contributing to further weakness in the US Dollar, which has weighed on the USD/JPY pair.
Technical Outlook for USD/JPY
The USD/JPY pair continues to face downward pressure following a failure to break above the 148.00 mark this week. Technical indicators suggest that bearish momentum remains intact, with oscillators on the daily chart still deep in negative territory, indicating that the path of least resistance is to the downside. A break below the psychological 145.00 level could open the door to further losses, potentially exposing the year-to-date low near 144.55, with the 144.00 round figure as the next support target.
Conversely, the 146.00 level is expected to cap any attempts at recovery. A break above the Asian session high of 146.35 could trigger short-covering, potentially lifting the USD/JPY pair to the 147.00 level and testing the 147.40-147.45 region. A sustained rally beyond these levels would shift the near-term bias toward the bullish side, allowing for a potential move back to the 148.00 area.
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