The Japanese yen appreciated toward 143 per dollar on Tuesday, rising for a third consecutive session as the greenback continued to weaken under the weight of growing global trade uncertainty.
Japanese yen rises for third straight session
The rally in the yen—traditionally viewed as a safe-haven currency—came amid renewed investor caution following remarks by US President Donald Trump, who stated he had no immediate plans to speak with Chinese President Xi Jinping this week. However, Trump also hinted at a possible reduction in the steep 145% tariff rate currently imposed on Chinese imports, introducing a degree of ambiguity that temporarily soothed some market nerves but failed to provide lasting clarity on the trajectory of US-China trade policy.
Adding to the currency's upward momentum, traders closely watched the progress of recent US-Japan bilateral trade talks. Tokyo has expressed a desire to finalize a deal with Washington by June, with the negotiations reportedly covering tariff exemptions and broader economic cooperation. While details remain limited, market participants expect that any agreement could bolster Japan's export competitiveness and reduce pressure on its currency markets.
Eyes on Bank of Japan
On the monetary policy front, the Bank of Japan maintained its benchmark interest rate at 0.5% during last week’s policy meeting, in line with market expectations. However, the central bank struck a more cautious tone by downgrading its forecasts for both economic growth and inflation, citing a slowdown in external demand and persistent disinflationary pressures. This reinforced investor expectations that Japan will maintain its accommodative stance for the foreseeable future, distinguishing it from more hawkish peers in the West.
Trading volumes remain subdued
Despite the yen’s gains, trading volumes remained subdued on Tuesday due to a public holiday in Japan, limiting overall market activity and exaggerating price movements. Nevertheless, the currency’s upward trajectory highlights investor sensitivity to geopolitical risk and the narrowing of interest rate differentials as the Federal Reserve also shows signs of pausing its tightening cycle amid slowing global growth.
Looking ahead, currency markets are expected to remain volatile as investors await concrete developments in trade negotiations and more clarity on central bank strategies. The yen’s continued strength could complicate Japan’s export-led recovery, potentially drawing increased scrutiny from policymakers in Tokyo in the coming weeks.
