Japanese yen eases amid soft trade data

The Japanese yen slipped to around 146.6 per dollar on Wednesday after soft trade data reignited concerns over Japan’s export-reliant economy.

Exports edged down 0.1% in August, marking the fourth consecutive monthly decline. While the drop was smaller than expected, the details highlighted vulnerabilities: shipments to the US tumbled 13.8%, reflecting the impact of tariffs and softer American demand, while exports to China remained subdued amid sluggish regional trade.

Imports contracted 5.2%, moderating from July’s 7.4% fall but exceeding analyst expectations of a 4.1% decline, suggesting that domestic consumption and industrial activity remain weak.

On the policy front, the Bank of Japan is expected to hold rates steady at 0.5% at its upcoming meeting, as officials balance lingering domestic fragility against global risks.

Core inflation has shown signs of cooling, while the export slowdown and tariff-related uncertainty argue for caution. Still, policymakers are mindful of yen volatility and capital outflows, which could put pressure on financial stability if left unchecked.

Externally, the yen’s movements were shaped by expectations around the Federal Reserve. The US central bank is widely anticipated to cut rates by 25 basis points later today, with markets pricing in roughly 67 basis points of easing by year-end.

The narrowing interest rate differential between US Treasuries and Japanese government bonds has offered some support to the yen, even as safe-haven demand remains muted.

Despite the latest dip, the currency hovered near two-month highs, reflecting the broader downtrend in the dollar ahead of the Fed’s decision. Analysts caution, however, that if US policymakers signal a more measured pace of easing than markets currently expect, the yen could quickly retrace its gains.

Conversely, a dovish Fed could strengthen the case for further yen appreciation, especially if Japan’s trade and inflation data show stabilization in the months ahead.