- The Japanese Yen attracted some dip-buyers following upbeat domestic data.
- BoJ rate hike bets and reviving safe-haven demand also lend support to the JPY.
- The prevalent USD selling bias further exerts downward pressure on USD/JPY.
The Japanese Yen (JPY) remains on the front foot through the Asian session in the wake of Japan’s upbeat Machinery Orders data released earlier this Thursday, which bolstered the case for further policy tightening by the Bank of Japan (BoJ). Apart from this, the flight to safety is seen as another factor underpinning the JPY, which, along with a broadly weaker US Dollar (USD), keeps the USD/JPY pair depressed near a two-week low.
US President Donald Trump’s proposed sweeping tax bill fueled concerns about the US government’s fiscal health. Adding to this, renewed US-China tensions weigh on investors’ sentiment and boost demand for traditional safe-haven assets, including the JPY. The USD, on the other hand, languishes near a two-week low amid bets for more interest rate cuts by the Federal Reserve (Fed) and the worsening US fiscal outlook.
Japanese Yen stands firm amid BoJ rate hike bets, sustained safe-haven demand
- Data released earlier this Thursday showed that Japan’s Core Machinery Orders – a key leading indicator of capital spending over the next six to nine months – rose 13.0% in March, defying forecasts for a 1.6% decline. This marks the highest level in nearly two decades and assists the Japanese Yen to attract dip-buyers.
- The Bank of Japan recently showed a willingness to hike interest rates further this year amid signs of broadening inflation in Japan. Moreover, investors expect that rising wages could lead to a significant increase in consumption, which, in turn, should allow the central bank to continue on its path of policy normalization.
- Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs and top foreign exchange official, said early Thursday the US did not discuss FX levels at the finance ministers’ meeting. Mimura does not believe that there is any gap in understanding with the US and reaffirmed that forex should be determined by the market.
- Investors remain hopeful about progress in trade negotiations between the US and Japan and the possibility of an eventual deal. Japan’s Trade Minister Ryosei Akazawa is expected to attend the upcoming third round of ministerial-level talks with US Trade Representative Jamieson Greer. Moreover, US Treasury Secretary Scott Bessent is also likely to take part in the trade negotiations.
- US President Donald Trump’s dubbed “One Big, Beautiful Bill” is expected to come to the House floor for a vote sometime on Thursday, and if passed, will add $3 trillion to $5 trillion to the federal deficit over the next ten years. This adds to worries about a deteriorating US fiscal outlook and weighs on investors’ sentiment.
- China accused the US of abusing export control measures and violating Geneva trade agreements after the US issued guidance warning companies not to use Huawei’s Ascend AI chips. China’s Commerce Ministry said on Wednesday that US measures on advanced chips are ‘typical of unilateral bullying and protectionism.’
- Federal Reserve officials expressed concerns over economic and business sentiment in the wake of the uncertainty tied to the Trump administration’s trade policies. Adding to this, a weak 20-year Treasury bond sale reinforced the view that investors are shying away from US assets and kept the US Dollar depressed.
- Trump reportedly told European leaders that Russian President Vladimir Putin isn’t ready to end the war with Ukraine, as he thinks he is winning. Meanwhile, Israel’s military continued to pound the Gaza Strip and block desperately needed food aid. This keeps geopolitical risks in play and further benefits the safe-haven JPY.
- Thursday’s release of flash PMIs could provide a fresh insight into the global economic health. Moreover, trade developments should influence the broader risk sentiment. Adding to this, the US macro data – the usual Weekly Initial Jobless Claims and Existing Home Sales – might provide some impetus to the USD/JPY pair.
USD/JPY bears await break below 61.8% Fibo. level before placing fresh bets
From a technical perspective, the USD/JPY pair’s intraday move up on Thursday falters near the 144.40 region. The said area nears a confluence support breakpoint – comprising the 50% retracement level of the April-May rally and the 200-period Simple Moving Average (SMA) on the 4-hour chart – and should act as a key pivotal point. A sustained strength beyond could trigger a short-covering move, though it is likely to attract fresh sellers near the 145.00 psychological mark. This should cap spot prices near the 145.35-145.40 region, or the 38.2% Fibo. retracement level, which, if cleared decisively, might shift the near-term bias in favor of bullish traders.
Meanwhile, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the USD/JPY pair remains to the downside. However, the Relative Strength Index (RSI) on the 4-hour chart has moved on the verge of breaking into oversold territory, making it prudent to wait for some near-term consolidation before positioning for the next leg of a downfall. That said, acceptance below the 143.20 area, or the 61.8% Fibo. retracement level, might prompt some technical selling and drag spot prices below the 143.00 round figure, to the next relevant support near the 142.40-142.35 area en route to the 142.00 mark.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
