Japanese yen firms as dollar softens

The Japanese yen firmed to around 147.3 per dollar on Tuesday, building on gains from the previous session as the greenback weakened amid rising expectations of deeper Federal Reserve rate cuts.

Attention turned to upcoming revisions in US employment data for the April 2024–March 2025 period, which could highlight that the Fed has been falling behind in its mandate to support maximum employment.

Markets are now pricing in an 89% chance of a 25 basis point cut at next week’s meeting, while some traders continue to position for a more aggressive 50 basis point move.

On the domestic front, investors assessed the political fallout from Prime Minister Shigeru Ishiba’s resignation, triggered by mounting divisions within the ruling party and lingering pressure following his defeat in last year’s national elections.

The political shake-up also comes as Japan faces renewed challenges in pushing forward a trade agreement with the United States, adding another layer of uncertainty to the outlook.