The Japanese Yen (JPY) continued to draw safe-haven inflows for the third consecutive session on Tuesday, as market anxiety over U.S. President Donald Trump’s tariff threats and the intensifying U.S.-China trade conflict stoked fears of a potential global recession. Bolstering the JPY further, expectations are firming that the Bank of Japan (BoJ) will persist with interest rate hikes into 2025, contrasting sharply with anticipated U.S. policy easing.
These dynamics pushed the USD/JPY pair closer to the key 140.00 psychological threshold during Asian trading—its lowest level since September 2024—while the U.S. Dollar (USD) extended losses amid a broader selling bias. Investors remain rattled by Trump’s unpredictable tariff policies and his renewed criticism of Federal Reserve Chair Jerome Powell, which has raised fresh doubts about the Fed’s independence.
Adding to the pressure on the greenback are mounting bets that the Federal Reserve will begin aggressively cutting rates as early as June, potentially lowering borrowing costs by up to 100 basis points by year-end. This outlook marks a stark divergence from the BoJ’s hawkish policy trajectory, enhancing the JPY’s relative appeal.
BoJ Governor Kazuo Ueda and board member Junko Nagakawa have both emphasized that Japan’s real interest rates remain low, and that tightening will continue if inflation and economic growth meet projections. Reports suggest the BoJ will signal next week that U.S. tariffs are unlikely to derail Japan’s economic momentum, reinforcing its policy stance.
Meanwhile, high-level U.S.-Japan trade negotiations continue. Japan’s Economic Revitalization Minister Ryosei Akazawa said a deal remains distant and stressed that Japan won’t sacrifice agriculture in favor of protecting its auto industry. Finance Minister Katsunobu Kato is set to meet U.S. Treasury Secretary Scott Bessent later this week to discuss currency developments—another potential market-moving event.
Markets are also eyeing upcoming U.S. data, including the Richmond Manufacturing Index due Tuesday, followed by global flash PMIs on Wednesday. These releases, along with any updates on U.S.-China trade tensions, will be key in shaping short-term sentiment toward the USD/JPY pair.
Technical Outlook: Yen Bulls Eye Break Below 140.00
From a technical standpoint, the USD/JPY pair appears poised for further downside. Though the daily Relative Strength Index (RSI) is approaching oversold territory, limiting immediate bearish momentum, any bounce is expected to face resistance near the 141.60–141.65 zone. A break above this area could trigger a short-covering rally, lifting prices toward 142.35–142.40.
Conversely, if the pair breaches the 140.45 support—Monday’s multi-month low—a move toward the 140.00 mark appears likely. Continued selling could even push the pair to challenge 2024’s swing low near the 139.60–139.55 region, reinforcing the JPY’s bullish trend.
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