The Japanese Yen has had a shaky start to the week, clawing back some losses but still hovering near a multi-week low against the U.S. dollar. Risk appetite took a hit after President Trump lobbed another trade grenade over the weekend, threatening fresh 30% tariffs on imports from Mexico and the EU starting August 1.
That escalation has traders flocking to safe-haven assets like the Yen, but ironically, the very trade uncertainty that supports JPY is also tempering expectations of a rate hike from the Bank of Japan. Toss in Japan’s own political jitters and a Fed that isn’t in a hurry to cut, and the USD/JPY pair remains stuck in a tug-of-war.
Here’s what you need to know and watch:
1. Tariff Turbulence Boosts Yen, But Not Enough
The Japanese Yen got a brief lift from renewed safe-haven flows after Trump’s latest tariff letters hit over the weekend. But don’t get too excited. This move was limited. Traders still aren’t going all-in on JPY because Japan is one of the tariff targets, and the broader global slowdown could hurt its already fragile economy.
2. BoJ Rate Hike Odds Are Slipping
Japan's central bank may face political pressure to keep interest rates low for longer than it wants, as opposition parties favoring tax cuts and loose monetary policy are expected to gain influence after a July 20 election. More here:
— #Reuters Business (#@ReutersBiz)
2:18 AM • Jul 14, 2025
With inflation cooling, real wages declining, and now the risk of a deeper trade war, the Bank of Japan is under less pressure to hike. Markets had been pricing in some tightening this year, but the odds are shrinking fast. Add in political noise before Japan’s upper house elections on July 20, and the BoJ may prefer to sit tight.
3. USD/JPY Stays Buoyant on Fed Pause
The U.S. dollar isn’t giving up much ground either. Traders are now rethinking how aggressive the Fed can be with rate cuts, especially if U.S. inflation remains sticky and the labor market holds up. That’s keeping USD/JPY elevated, even as JPY tries to benefit from risk-off flows.
4. Technical Picture: Breakout Confirmed, Bulls Still in Control
USD/JPY has broken out of the descending triangle that capped price since April, flipping the 146.50–147.00 zone into support. Price is now holding above the 50-day SMA at 144.85, a level that previously acted as dynamic resistance, now a solid base for bulls to lean on.
Momentum is firmer this time compared to the failed rallies in April and May. The pair is re-testing the 148.30–148.60 resistance cluster. A clean break above that could open the door to 148.90 and possibly 149.60. On the downside, watch for dip buying at 146.50, 145.00, and the 144.85 SMA.
Here’s the Takeaway:
Trump’s tariff threats have reignited global uncertainty, but they’ve also complicated the narrative for the Yen. JPY may get bouts of strength from risk-off flows, but don’t expect fireworks unless the BoJ surprises or the Fed pivots hard. For now, USD/JPY is a story of cautious bulls and nervous bears, and that could mean more range-bound chop before the next big move.