The Japanese yen weakened past 143 per dollar on Tuesday, snapping a three-day winning streak, as mixed domestic signals and external factors weighed on the currency.
Yen weakens despite hawkish BOJ signals
The decline came even as Bank of Japan Governor Kazuo Ueda reiterated the central bank’s readiness to raise interest rates if economic conditions and inflationary momentum show sustained improvement. Ueda noted that Japan’s economy continues a moderate recovery, buoyed by solid business sentiment, improving corporate earnings, and resilient domestic demand, though he acknowledged lingering weakness in certain sectors, such as manufacturing exports.
Despite these relatively positive domestic indicators, the yen faced renewed downward pressure from a resurgent U.S. dollar. The greenback gained ground as global investors largely shrugged off weaker-than-expected U.S. economic data and instead focused on safe-haven flows amid rising geopolitical and trade tensions. The market’s firm response to recent global developments, including inflation fears and monetary policy uncertainty, lent further support to the dollar and weighed on the yen’s appeal.
Trump threat effects
Compounding concerns for Japan, President Donald Trump’s recent threat to double tariffs on steel and aluminum imports to 50%—effective June 4—sparked unease in Tokyo, especially regarding the potential impact on Japan’s crucial steel and automotive sectors. The threat comes amid an ongoing U.S. investigation into strategic imports, increasing fears that Japan, despite being a key ally, could face further trade restrictions. These tensions have added another layer of complexity to Japan’s economic outlook, as exporters remain vulnerable to shifting trade dynamics.
Looking ahead, investors are closely monitoring upcoming Japanese labor market and household spending data due later this week. These indicators are expected to provide further clarity on the strength of domestic consumption and employment trends—key inputs for the Bank of Japan as it weighs the timing and scale of any potential rate hike. In the meantime, the yen remains exposed to external market forces, particularly U.S. interest rate expectations and global risk sentiment, which continue to dominate near-term currency movements.
