The Japanese yen depreciated again past 150 per dollar on Wednesday, reversing some of the gains seen in the previous session as investors braced for the implementation of US reciprocal tariffs, which could have a significant impact on key Japanese exports, particularly in sectors like automobiles and electronics.
Japanese yen slips as US tariffs loom
The yen’s weakness was further exacerbated by a rebound in risk assets, including equities and commodities, which diminished demand for the yen as a safe-haven currency. As global markets recovered, the appetite for higher-risk investments grew, leading to reduced interest in low-yielding safe assets like the yen.
Domestically, Bank of Japan Governor Kazuo Ueda told parliament that the central bank would continue raising interest rates if the country’s economic projections hold true. Ueda emphasized that Japan’s economic growth had outpaced forecasts, supported by a positive cycle of rising incomes that is contributing to increased consumer spending and demand. This signals that the BOJ may look to further tighten monetary policy in response to stronger-than-expected economic activity. However, Ueda also noted the need to remain vigilant, particularly as the global economic environment presents uncertainties.
BoJ kept rates unchanged last week
Last week, the Bank of Japan kept its policy rate steady at 0.5%, maintaining a cautious stance as it assesses ongoing global risks, especially the potential consequences of higher US tariffs. These tariffs could weigh on Japan's export-driven economy, which remains heavily reliant on global demand for its goods. As such, while domestic economic indicators suggest solid growth, the BOJ is also mindful of external pressures that could affect Japan’s export sector and broader economic stability. The interplay between domestic economic performance and global trade dynamics will likely influence future BOJ decisions, keeping investors on edge about potential policy changes in the months ahead.
