The Japanese yen held steady at around 149.8 per dollar on Wednesday, remaining sideways for the week as investors braced for US President Donald Trump’s latest round of tariffs.
Japanese yen steady ahead of US tariff rollout
With the market awaiting more clarity on the specific details of the tariffs, the yen has remained relatively stable, reflecting caution as traders assess the potential impact on global trade. President Trump is set to impose reciprocal tariffs on countries that impose duties on US goods, alongside new levies on car imports. The move could directly affect Japan, particularly its key export industry, which is heavily reliant on global trade, including automotive exports.
The yen's stability contrasts with the rising uncertainty surrounding the impact of these new tariffs. Japan's key export sectors, including automobiles and technology, are highly vulnerable to trade disruptions, especially given the size and influence of the US market. The tariffs could raise costs for Japanese companies and reduce their competitiveness abroad, especially if the US retaliates further.
BoJ Governor warns of tariffs impact
Meanwhile, Bank of Japan Governor Kazuo Ueda issued a warning that the new US tariffs could have a significant adverse effect on global trade and economic growth, amplifying concerns in Japan about the potential for an economic slowdown. Ueda noted that the tariffs could complicate Japan’s recovery, particularly as the country’s economy is already facing challenges from demographic shifts and weak domestic demand.
Data earlier this week showed that business sentiment in Japan weakened during the first quarter, with growing concerns over the potential impact of the US tariffs on its export-driven economy. Japanese businesses are closely monitoring the trade situation, as heightened uncertainty could lead to reduced investment and production in the near term. Despite this, the Bank of Japan is still expected to raise interest rates later this year, reflecting confidence in the country’s long-term economic outlook. However, the uncertainty surrounding global trade and the domestic economic climate continues to cloud the overall forecast.
Investors are cautious
As a result, investors are cautious, as the yen’s strength could be tested if the trade situation escalates, with Japan’s export industry potentially facing additional headwinds. The outlook for Japan’s economy remains delicate, with trade policy playing a central role in shaping growth prospects in the coming months.
