Japanese Yen remains on the front foot as global meltdown underpins safe-haven demand
The Japanese Yen (JPY) fills the weekly bullish gap opening against its American counterpart amid concerns that harsher US reciprocal tariffs could negatively impact Japan's economy and force the Bank of Japan (BoJ) to hold rates steady for the time being. However, signs of broadening inflation in Japan keep the door open for further BoJ interest rate hikes in 2025. Apart from this, the prevalent risk-off environment assists the safe-haven JPY in stalling its intraday retracement slide.
Investors remain worried that US President Donald Trump's reciprocal tariffs would dent the global economic growth. Apart from this, persistent geopolitical tensions lead to an extended sell-off in equity markets across the world. Meanwhile, the anti-risk flow, along with bets for a more aggressive policy easing by the Federal Reserve (Fed), continues to drag the US Treasury bond yields lower. This caps the US Dollar's (USD) attempted recovery on Friday and caps the USD/JPY pair.
Asian stock markets and US equity futures tumbled at the start of a new week amid growing concerns about a widening global trade war and the mounting risk of recession. US President Donald Trump late last Wednesday imposed a 10% baseline tariff on all imports and higher duties on some of the country's biggest trading partners. In response, the European Union is all set to join China and Canada in imposing retaliatory tariffs.
Investors scaled back their bets for early interest rate hikes by the Bank of Japan amid concerns that harsher-than-expected US tariffs could negatively impact Japan's economy. Japan's Chief Cabinet Secretary Yoshimasa Hayashi said this Monday that US tariffs are expected to have a big impact on Japan-US economic relations. This, in turn, fails to assist the safe-haven Japanese Yen to capitalize on its modest Asian session gains.
Meanwhile, Japan's Prime Minister Shigeru Ishiba said late Sunday that the country would continue pressing the US to lower tariffs on Japanese goods, but acknowledged that progress was unlikely to come overnight. Ishiba added that he is aiming to have a call with Trump this week and also emphasized the importance of domestic support measures in the meantime. This, however, does little to impress the JPY bulls.
Source: Fxstreet
