- USD/JPY recovers some lost ground to near 143.55 in Friday’s early Asian session.
- An escalating trade war and uncertainty boost the safe-haven demand, supporting the Japanese Yen.
- The hawkish stance of the BoJ contributes to the JPY’s upside.
The USD/JPY pair holds losses near 143.55 during the Asian trading hours on Friday, pressured by the weaker US Dollar (USD). The uncertainty surrounding the tariff policy and the concerns over the global economic slowdown boosts encouraged investors to safe-haven currency like the Japanese Yen (JPY).
US President Donald Trump said on Wednesday he would temporarily lower duties on dozens of countries but ramped up the tariff on China to 125% from 104%. The looming threat of both global and US recession, driven by aggressive trade policies and uncertainty over future measures, drags the Greenback lower.
Traders anticipate that the US Federal Reserve (Fed) will resume cutting interest rates in June and probably lower its policy rate by a full percentage point by the end of the year. According to the CME FedWatch tool, derivatives markets now imply a 44% possibility that the Fed will cut rates at its next meeting on May 6-7, up from 14% a week ago.
Meanwhile, the hawkish stance from the Bank of Japan (BoJ) marks a big divergence in comparison to the prospects for multiple interest rate cuts by the Federal Reserve (Fed). This, in turn, provides some support to the JPY and acts as a headwind for the pair.
Japan’s Finance Minister Shunichi Kato said early Friday that foreign exchange rates should be set by markets, adding that excess FX volatility negatively impacts the Japanese economy.
(This story was corrected at 02:05 GMT to say in the title that USD/JPY recovers losses to near 143.50 amid tariff worries, not to tumble to near 143.50.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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