USD/JPY Outlook: Japanese Yen Falls Amid BoJ Rate Hike Expectations, Trump’s Tariff Concerns
The Japanese Yen is weakening further amid concerns that former US President Donald Trump might impose further trade tariffs against Japan, weighing on the latter’s economy. Though a marginal U.S. Dollar strength in the USD/JPY exchange rate supports this pair, another round of rising expectations for yet another rate hike by the BoJ limits losses in the Japanese Yen. Investors are closely watching Japan’s bond yields, inflation trends, and global market volatility, as the BoJ’s tightening stance contrasts with the Federal Reserve’s cautious approach. Additionally, technical indicators suggest that USD/JPY remains vulnerable below the key resistance zone of 152.50-152.45, making further downside movement a possibility. KEY LOOKOUTS • Investors anticipate another Bank of Japan interest rate hike, driven by rising inflation and real wage growth, supporting the Japanese Yen. • Renewed fears of U.S. trade tariffs on steel and aluminum imports may pressure Japan’s economy, potentially impacting the Yen’s strength. • A strong U.S. Dollar, supported by upbeat job data and Federal Reserve’s cautious stance, influences the USD/JPY pair’s price movement. • The USD/JPY pair faces strong resistance at this confluence zone, with a potential downside move if the pair fails to sustain above it. The Japanese Yen faces a complex trading environment as investors weigh the impact of potential U.S. trade tariffs, a strong U.S. Dollar, and expectations of further tightening by the Bank of Japan (BoJ). While hawkish BoJ sentiment and rising Japanese bond yields offer support to the Yen, concerns over Trump’s protectionist policies and their inflationary effects continue to pressure the currency. The Federal Reserve’s cautious stance, coupled with strong U.S. job data, further strengthens the Dollar, keeping the USD/JPY pair volatile. Meanwhile, technical indicators suggest that the pair remains vulnerable below the key resistance zone of 152.50-152.45, with potential downside risks if selling pressure intensifies. The Japanese Yen remains under pressure amid renewed U.S. trade tariff concerns and a strong U.S. Dollar, despite growing expectations of a BoJ rate hike. While rising Japanese bond yields offer some support, technical indicators suggest USD/JPY remains vulnerable below the 152.50-152.45 resistance zone, with potential downside risks. • Investors expect the Bank of Japan to raise interest rates again, supporting the Yen and narrowing the U.S.-Japan rate differential. • Renewed fears of U.S. trade tariffs on steel and aluminum imports add pressure on Japan’s economy and the Yen. • Strong U.S. job data and the Federal Reserve’s cautious stance provide a lift to the U.S. Dollar, impacting USD/JPY movement. • Higher Japanese Government Bond (JGB) yields support the Yen, limiting deeper losses despite global economic concerns. • USD/JPY faces strong resistance at this key confluence zone, making further gains uncertain. • The IMF points out spillover risks for BoJ rate hikes, which include increased costs of debt servicing and financial pressure on corporates. • The USD/JPY pair continues to trade in a volatile range due to uncertainty over U.S. trade policies, global inflation trends, and central bank decisions. The Japanese Yen remains on the back foot as renewed fears over potential U.S. trade tariffs and a strong U.S. Dollar take a toll on its performance. Former President Donald Trump’s proposal to impose additional tariffs on steel and aluminum imports raises fears of economic strain on Japan, adding to the Yen’s weakness. Meanwhile, the Federal Reserve’s cautious approach to interest rates, coupled with strong U.S. job data, continues to support the Dollar, keeping the USD/JPY pair elevated. Expectations of another rate hike by the Bank of Japan (BoJ) have also helped limit deeper losses for the Yen, as the widening JGB yields close the interest rate gap between the US and Japan. USD/JPY Daily Price Chart TradingView Prepared by ELLYANA The USD/JPY pair faces technical resistance around the 152.50-152.45 confluence zone, suggesting that further upside may be capped short of strong buying momentum. The International Monetary Fund (IMF) has also warned Japan to remain vigilant about potential financial risks stemming from BoJ’s tightening measures, including rising government debt costs and corporate financial stress. Additionally, Japan’s inflation-adjusted real wages have shown steady growth, reinforcing the case for further monetary tightening by the BoJ. With ongoing global market volatility and uncertainty around U.S. trade policies, the Yen’s movement remains highly sensitive to economic and geopolitical developments. TECHNICAL ANALYSIS USD/JPY pair remains vulnerable below the key resistance zone of 152.50-152.45, which includes the 100-day and 200-day Simple Moving Averages (SMAs). Indicators on the daily chart remain in negative territory, signaling a bearish bias, though not yet in the oversold zone. If the pair fails to sustain above this resistance level, fresh selling pressure could push prices lower towards the 151.25 support, followed by the critical 151.00-150.95 zone. A decisive break below this area could open the door for further declines towards the 150.50 psychological level and 149.60 horizontal support. However, a sustained move above 152.50 may trigger short-covering, allowing the pair to reclaim the 153.00 level, with further upside potential depending on market sentiment and fundamental catalysts. FORECAST The USD/JPY pair could see an upward movement if the U.S. Dollar remains strong, driven by positive economic data and the Federal Reserve’s cautious stance on rate cuts. A sustained break above the 152.50-152.45 resistance zone could trigger fresh buying interest, allowing the pair to reclaim the 153.00 psychological level. If bullish momentum persists, the next upside target would be 153.50, followed by the 154.00 mark. Further gains could be supported by renewed concerns over Japan’s economic outlook, particularly if the Bank of Japan takes a slower approach to monetary tightening. Any increase in global risk tone may also keep pushing investors toward the U.S. Dollar, as a haven, and subsequently lift USD/JPY more. On the downside, this pair has found some critical supports at 151.25 now, followed by the 151.00-150.95 zone. It can easily head down from that area, touching the next destination at 150.50; that is again a psychological target. If selling pressure intensifies, USD/JPY could extend its decline towards 149.60 and potentially test the December swing low near 148.65. Factors that