USD/JPY consolidates around 146.30 as investors seek current status of US-Japan trade talks
- USD/JPY wobbles around 146.30 as investors await fresh headlines regarding US-Japan trade negotiations.
- US President Trump stated earlier that Tokyo restricts buying rice and autos from Washington.
- FOMC minutes show that interest rate cuts would come if tariff-driven inflation proves to be modest.
The USD/JPY pair trades sideways around 146.30 during the European trading session on Thursday. The pair consolidates as investors await fresh news regarding trade talks between the United States (US) and Japan.
Earlier this week, US President Trump imposed 25% tariffs on imports from Japan, which will come into effect on August 1. The size of tariffs was lower than what Trump announced at the start of month, while stating that Tokyo behaves stiffly over agriculture imports from Washington and disparity over automotive trade.
“We've dealt with Japan. I'm not sure if we're going to make a deal. I doubt it. They're very tough. You have to understand they're very spoiled,” Trump said and warned of 30%-35% tariff rate.
Meanwhile, Japanese Prime Minister Shigeru Ishiba said on Tuesday that Tokyo would continue negotiations with the US to seek a mutually beneficial trade deal, Reuters reported.
During the European trading session, the US Dollar trades stably as Federal Open Market Committee (FOMC) minutes for the June 17-18 policy meeting signaled that members are unlikely to support interest rate cuts in the near term.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades calmly near 97.40.
The Fed minutes indicated that monetary policy adjustments would appropriate later this year if tariff-driven inflation proves to “modest or temporary”.
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.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
