The Japanese Yen (JPY) surged to its strongest level since September during Asian trading on Monday, as growing safe-haven demand and persistent weakness in the US Dollar (USD) bolstered the currency’s gains. The JPY’s rally comes amid optimism over US-Japan trade negotiations and concerns surrounding the global financial landscape.
Investor sentiment remains cautious due to uncertainty over US President Donald Trump’s shifting tariff stance, prompting a flight to traditional safe-haven assets like the Yen. This comes as US economic confidence continues to erode, driving the USD to fresh two-year lows despite hawkish remarks from Federal Reserve Chair Jerome Powell last week.
Meanwhile, Friday’s data showed a further acceleration in Japan’s core inflation, with the core Consumer Price Index (CPI) rising 3.2% year-on-year in March, up from 3% in February. Core-core inflation—which excludes volatile food and energy prices—climbed to 2.9% from 2.6%, suggesting broader price pressures in the Japanese economy. The figures have left the door open for additional rate hikes by the Bank of Japan (BoJ).
BoJ Governor Kazuo Ueda acknowledged the need to monitor the economic fallout from US tariffs but reaffirmed the bank’s willingness to raise rates if the domestic economy continues on a stable recovery path. BoJ board member Junko Nagakawa echoed these sentiments, further fueling expectations of tightening monetary policy.
Despite reports suggesting the BoJ may lower its growth forecasts amid external risks, JPY bulls remain unfazed. Comments from Japanese Prime Minister Shigeru Ishiba added to market optimism, as he emphasized fairness and flexibility in the ongoing US-Japan trade talks and called for a model negotiation framework that could benefit broader global trade relations.
Technically, the USD/JPY pair has dropped below the 141.00 level for the first time since September 2024. However, with the daily Relative Strength Index (RSI) showing slightly oversold conditions, analysts caution against chasing the move lower without a period of consolidation.
Any attempted rebound could face resistance at 141.60–141.65, followed by 142.00 and the 142.40–142.45 range. A breakout above these levels may trigger short-covering that could drive the pair towards the 143.00–143.30 zone. Conversely, sustained weakness below the 141.00 level may expose the USD/JPY pair to further downside, with key support at 140.45–140.00 and potentially down to the 2024 low around 139.60.
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