The Japanese Yen experienced a partial retracement of intraday gains, despite initial support from dip-buying activity following overnight losses. Anticipation of future Bank of Japan (BoJ) rate increases and concerns regarding potential recessionary pressures are contributing to safe-haven demand for the JPY. Concurrently, dovish expectations surrounding Federal Reserve policy are exerting downward pressure on the USD/JPY exchange rate.
Despite a generally bullish near-term outlook, the JPY’s appreciation is being tempered by anxieties regarding the potential adverse effects of increased US tariffs on the Japanese economy and a moderate improvement in global risk appetite. However, market consensus regarding continued BoJ monetary tightening in 2025, driven by indications of broadening inflation, is likely to limit significant JPY depreciation.
The prospect of global economic deceleration stemming from proposed US reciprocal tariffs is further expected to constrain JPY losses. This factor, coupled with renewed USD selling pressure, is maintaining the USD/JPY pair below the 148.00 level during the Asian trading session. Increased speculation that a tariff-induced US economic slowdown may prompt the Federal Reserve to reinstate rate cuts is weighing on USD sentiment and providing additional support for the JPY. However, improved global risk sentiment appears to be capping further gains for the safe-haven currency.
