The Japanese yen eased to around 149.5 per dollar on Wednesday, pulling back from a four-and-a-half-month high reached in the previous session, as the dollar remained supported by escalating tariff threats from US President Donald Trump.
Japanese yen eased to around 149.5 per dollar
In the latest developments, Trump ordered a probe into potential tariffs on copper imports, aiming to boost US production of this critical metal and reduce reliance on foreign supply. Additionally, Trump confirmed that tariffs on Canada and Mexico "will go forward" once the one-month delay period expires next week, signaling that protectionist policies remain a cornerstone of his trade strategy.
Despite the pullback in the yen, it remained near multi-month highs, buoyed by strong expectations that the Bank of Japan (BoJ) will continue to raise interest rates later this year. This optimism stems from upside surprises in Japan's fourth-quarter inflation, which has led investors to believe that the BoJ may shift its ultra-loose monetary policy stance to address rising prices. The central bank's decision on rate hikes will be heavily influenced by ongoing inflation trends and economic growth data, and market participants are eagerly awaiting the BoJ's next steps.
Investors attention turns to key economic data
As the yen stays near elevated levels, investors are now focusing on a series of key economic reports set for release on Friday, including data on industrial production, retail sales, and Tokyo inflation. These reports will provide further insights into Japan's economic health and could offer more clarity on the BoJ's monetary policy outlook for the remainder of 2025. If the data continues to show inflationary pressure and signs of economic resilience, the yen could maintain its strength, further shaping the market’s expectations for the BoJ's future actions.
Eyes on geopolitical developments
In the broader context, the ongoing trade tensions between the US and its trading partners, particularly Mexico and Canada, will likely add volatility to the currency markets, with potential repercussions for the yen as well. Traders will also be looking for any signals from the US Federal Reserve regarding future interest rate hikes, as the broader global interest rate environment plays a crucial role in influencing the yen’s performance.
