The Japanese yen held steady around 152 per dollar on Tuesday after sliding in the previous session, weighed down by the greenback’s strength in the wake of the latest US tariffs.
Japanese yen stays firm against US dollar
Market sentiment was rattled after US President Donald Trump signed an executive order imposing 25% tariffs on steel and aluminum imports 'without exceptions or exemptions,' stoking fears of an inflation-driven global trade war. The move added to concerns that higher import costs could push inflation higher in the US, potentially limiting the Federal Reserve’s scope for future interest rate cuts, thereby supporting the dollar and pressuring the yen.
Focus on BoJ
Despite the recent decline, the yen remains underpinned by expectations that the Bank of Japan (BOJ) will continue to move away from its ultra-loose monetary policy stance. Last week, the currency surged over 2% amid growing speculation that the BOJ will press ahead with rate hikes this year. On Thursday, BOJ board member Naoki Tamura reinforced this view, stating that the central bank should raise its policy rate to at least 1% in the latter half of fiscal 2025, signaling a gradual path toward policy normalization.
Macroeconomic data effects
Additionally, stronger-than-expected domestic economic data has further fueled expectations of a hawkish shift. Recent wage and household spending figures came in above forecasts, suggesting resilient consumer activity and increasing pressure on the BOJ to tighten monetary policy. This follows the central bank’s historic decision to exit negative interest rates in March, a move that marked the beginning of a gradual shift toward a more conventional monetary framework.
What may affect forex
Looking ahead, traders will closely monitor upcoming US inflation data and any fresh signals from the BOJ regarding the pace and scale of future rate hikes. The yen's trajectory will likely depend on the evolving interest rate differentials between the BOJ and the Fed, as well as broader market reactions to geopolitical and trade developments.
