- The Japanese yen attracts some dip buyers amid declining optimism over US-China trade agreements.
- As BOJ continues to raise interest rates in 2025, more support for JPY will be loaned out.
- Dovish Fed’s expectations are to keep the US dollar recovery from a multi-year low to the upper limit and weigh USD/JPY.
The Japanese Yen (JPY) will remain on its front paws against American counterparts throughout Thursday’s Asian session, amid reviving demand for safe shelters. US Treasury Secretary Scott Bescent has eased market expectations for a quick resolution of US-China trade standoffs, suppressing market optimism and supporting JPY. Separately, we hope that Japan’s trade agreement with the US and betting on a higher interest rate by the Bank of Japan (BOJ) is another factor driving the flow towards JPY.
Meanwhile, Hawkish’s BOJ’s expectations show a greater divergence compared to the Federal Reserve’s prospects for more aggressive policy easing. This will benefit lower JPY and reduce the recovery of the US dollar (USD) from the multi-year low. The basic background appears to be leaning in the favor of the JPY Bulls. This is because traders are now turning to US economic dockets and trade development for short-term driving forces during early North American sessions.
Japanese Yen attracts safe hull flows as US-China trade trade optimism declines
- President Donald Trump said the 145% tariff on Chinese imports would ultimately drop significantly. Meanwhile, U.S. Treasury Secretary Scott Bescent has denied a Wall Street Journal report that the White House is unilaterally considering novel tariffs on Chinese imports.
- Bescent’s remarks suggested that the Trump administration could be waiting for China to make its first move. This in turn drives a safe haven flow towards the Japanese circle.
- The Japanese Finance Minister, Fish Colonel, told G7 countries on Thursday that US tariffs were extremely disappointed and created uncertainty in the financial markets. Meanwhile, Japanese Minister of Economic Revitalization Ryossie Akazawa will visit the United States for tariff consultations starting April 30th.
- Bank of Japan Governor Huada said last week that if US tariffs hurt the Japanese economy, the central bank may need to take policy measures. Additionally, reports suggest that the BOJ will cut its economic growth forecasts and warn of escalating risks from Trump’s fundamental trade tariffs.
- However, investors seem confident that BOJ will continue to raise interest rates in 2025 amid the expansion of Japan, which has been operating above the 2% target for about three years. This shows a significant divergence compared to the Federal Reserve reserve expectations.
- In fact, traders have priced the possibility that the Fed will resume its fee-cutting cycle in June, reducing its borrowing costs at least three times by the end of this year. This is not to help the US dollar take advantage of its two-day recovery, but to ease fears of the Fed’s independence.
- Trump has denounced Ukrainian President Voldymir Zelensky for comment that Ukraine will not recognize Russia’s control of Crimea. Trump added that the contract to end the war was very close, but said Zelensky’s refusal to accept US terms “is only an extension of the conflict.”
- This plays a geopolitical risk premium. This should benefit lower JPY, along with the expectations of policy provided by diverse BOJs. Traders are now turning their eyes to the US economic docket. It features weekly initial unemployed claims, durable product orders and existing home sales data.
USD/JPY find some support near 38.2% FIBO. Level Resistance Breakpoint
From a technical standpoint, overnights above the 23.6% Fibonacci retracement level of the March-April downfall, the 143.00 mark was considered an important trigger for the USD/JPY Bull. Additionally, the oscillators on the hourly chart have acquired a prospect of aggressive traction and support for the emergence of dip buyers near the 142.45-142.40 region. This helps limit the drawbacks near the 142.00 round diagram. Below that, spot prices may slide to mid-141.00 seconds on the way to the 141.10-141.00 region. The downward trajectory could expand further towards mid-140.50 support, potentially revealing a few months of low levels below the psychological mark of 140.00 mentioned Tuesday.
On the back, momentum back to above the 143.00 mark could face hurdles near the 143.55 area or near the overnight swing. Some follow-through purchases may lift USD/JPY Pair Beyond the 144.00 round figure, heading towards a 144.35 confluence. The latter consists of 38.2% Fibo. 4-hour level and simple moving average for 200th period (SMA) chartif it is decisively cleaned up, it should pave the way for some meaningful recovery in the short term.
Customs FAQ
Duties are customs duties imposed on the import or product category of a particular product. Tariffs are designed to help local producers and manufacturers become more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs, along with trade barriers and import allocations, are widely used as a tool for protectionism.
Although both tariffs and taxes generate government revenue to fund public goods and services, there are several distinctions. Customs duties are paid upfront at the port of entry, but taxes are paid at the time of purchase. Taxes are levied on individual taxpayers and businesses, and customs duties are paid by the importer.
There are two ways of thinking among economists regarding the use of customs duties. Some argue that tariffs are necessary to protect domestic industries and address trade imbalances, while others see them as harmful tools that could raise them high in the long term and could damage the trade war by encouraging The-Tat tariffs.
During preparations for the November 2024 presidential election, 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 the total US imports. During this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. So when Trump imposes tariffs, he wants to focus on these three countries. He will also use the revenue generated through tariffs to reduce personal income tax.
