The Japanese yen weakened past 143 per dollar on Wednesday, snapping a three-day rally, as investor appetite for risk rebounded following encouraging geopolitical developments.
Japanese yen weakens on US-China trade talks
The announcement that senior US and Chinese officials would meet in Switzerland later this week to restart trade negotiations helped ease market anxiety and reduce demand for traditional safe-haven currencies such as the yen. The yen’s retreat also reflected broader optimism across Asian markets, bolstered by the People’s Bank of China’s latest round of monetary easing, including a reduction in key policy rates designed to support faltering domestic growth.
Sentiment was further supported by hopes that global trade tensions may be starting to de-escalate. In parallel to US-China developments, traders closely monitored the progress of US-Japan bilateral trade negotiations, with Tokyo aiming to finalize a framework deal by June. Japanese policymakers are under pressure to secure more favorable terms for key exports—particularly automobiles and electronics—amid heightened scrutiny from Washington over trade imbalances.
Generally positive picture
On the domestic front, economic data offered a mixed but generally positive picture. The final Jibun Bank Japan Services PMI for April was revised higher to reflect the strongest increase in new business in nearly a year, driven by robust domestic demand and a pickup in tourism. This helped offset some weakness seen in the manufacturing sector and hinted at continued resilience in Japan's service-oriented economy. Still, firms reported persistent cost pressures and labor shortages, which could limit further expansion if not addressed.
Meanwhile, monetary policy remained firmly on hold. At its latest meeting, the Bank of Japan kept its benchmark interest rate unchanged at 0.5%, as widely expected, and revised down its growth and inflation forecasts for the year. Policymakers cited subdued consumption, declining export volumes, and geopolitical uncertainty as reasons for the downgrade. The central bank reiterated that it would maintain accommodative financial conditions for the foreseeable future, signaling that rate hikes are unlikely in the near term—even as other major central banks move toward more neutral or tightening stances.
Looking ahead, traders will continue to watch the trajectory of global trade diplomacy and the BOJ’s response to mounting pressure on the yen, which remains relatively weak despite occasional bouts of strength. Intervention risk by Japanese authorities remains on the table should currency depreciation threaten to undermine import costs or destabilize financial markets.
