- EUR/JPY recovers losses ahead of a meeting between Japan’s MOF, FSA, and the BoJ to discuss global financial market developments.
- The JPY finds support from rising safe-haven demand, driven by escalating fears of a global recession amid intensifying tariff tensions.
- The euro remains under pressure as markets increasingly price in a more dovish stance from the European Central Bank.
EUR/JPY recovers its daily losses, trading near the 160.50 during Asian trading hours on Wednesday. However, the currency cross faced challenges as the Japanese Yen strengthened ahead of a key meeting between Japan’s Ministry of Finance (MOF), Financial Services Agency (FSA), and the Bank of Japan (BoJ) to discuss international financial markets. A joint statement is expected following the meeting, though it’s likely to be light on actionable insights.
The JPY also found support amid increased safe-haven demand, fueled by growing fears of a global recession triggered by tariff tensions. Adding to the Yen’s appeal, US President Donald Trump has agreed to meet with Japanese officials to initiate trade negotiations, bolstering hopes for a potential US-Japan trade agreement. This optimism further supports the JPY. Additionally, expectations that the Bank of Japan (BoJ) will continue raising interest rates in 2025—driven by persistent domestic inflation—provide further upward pressure on the Yen.
The Euro (EUR) faced headwinds amid rising risk sentiment following the implementation of US retaliatory tariffs on Wednesday. The EUR also remains under pressure as market participants ramp up dovish expectations for the European Central Bank (ECB).
Several ECB policymakers—including Bank of Italy Governor Piero Cipollone, Bank of France Governor François Villeroy de Galhau, and Bank of Greece Governor Yannis Stournaras—have expressed support for further monetary easing.
Finance ministers from Eurozone countries are set to convene in Warsaw on Friday to discuss strategies to mitigate the impact of US-imposed tariffs. Governor Stournaras recently stated that the new tariffs would not hinder an April rate cut, asserting that inflation projections remain unchanged. Stournaras estimated that the tariffs could reduce Eurozone GDP growth by 0.3%–0.4% in the first year.
Poland’s Finance Minister Andrzej Domański warned of broader implications, noting that disrupted supply chains and rising corporate costs could weaken European growth and pressure regional currencies. Domański emphasized the potential for “adverse social consequences” and higher consumer prices, citing a Reuters report.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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