- The Japanese Yen gains support after a strong Tokyo CPI report.
- A hawkish BoJ stance and risk-off sentiment bolster the safe-haven JPY.
- The upcoming US PCE Price Index release on Friday may drive USD/JPY movement.
The Japanese Yen (JPY) slipped to a nearly four-week low against the US Dollar (USD) during Friday’s Asian session amid concerns that US President Donald Trump's trade tariffs could impact key Japanese exports. However, strong consumer inflation data from Tokyo provided some relief to JPY bulls, reinforcing expectations of further interest rate hikes by the Bank of Japan (BoJ). The BoJ’s Summary of Opinions from its recent meeting indicated that rate hikes remain a possibility if economic and price trends align with forecasts.
The prevailing risk-off sentiment, fueled by Trump’s 25% tariff on auto imports announced Wednesday, also supported the safe-haven JPY, pushing USD/JPY below the 151.00 mark. Despite this, renewed demand for the USD could limit further declines. Market participants are now awaiting the US Personal Consumption Expenditure (PCE) Price Index, which may offer insights into the Federal Reserve’s (Fed) monetary policy trajectory.
Japanese Yen Gains as Strong Tokyo CPI Data Reinforces BoJ Rate Hike Speculation
- US President Donald Trump’s announcement of a 25% tariff on imported cars and light trucks, set to take effect on April 3, raised concerns over its potential impact on Japan’s auto industry, which contributes about 3% to the nation’s GDP.
- Data released Friday revealed that Tokyo’s headline Consumer Price Index (CPI) rose to 2.9% in March from 2.8% in the previous month. The Tokyo Core CPI, excluding volatile fresh food prices, climbed to 2.4% from 2.2%, while a core measure that excludes both fresh food and energy increased to 2.2% from 1.9%, surpassing the BoJ’s 2% annual target. This strengthens the case for additional BoJ rate hikes.
- The BoJ’s Summary of Opinions from its March meeting showed broad agreement on raising rates if economic and price conditions align with expectations. However, the board also acknowledged growing downside risks to the economy due to US trade policy, suggesting a cautious approach in the near term.
- The broader risk sentiment weakened following Trump’s tariff announcement and concerns over potential reciprocal tariffs, which could slow US growth. This overshadowed an upward revision to US Q4 GDP, which grew at an annualized 2.4%, beating the previous estimate of 2.3%.
- Boston Fed President Susan Collins highlighted the Fed’s challenge of choosing between maintaining a restrictive policy stance or preemptively adjusting rates based on future economic conditions. Richmond Fed President Thomas Barkin warned that uncertainty surrounding US trade policy could suppress consumer and business spending, forcing the Fed into a cautious stance rather than the proactive rate cuts some investors anticipate.
- Investors now focus on the release of the US PCE Price Index, a key inflation gauge that could provide further clarity on the Fed’s policy outlook. The data is expected to impact the USD and drive USD/JPY movements in the coming sessions.
USD/JPY Technical Analysis: Key Levels to Watch
From a technical perspective, the recent pullback from the monthly high warrants caution before initiating new bullish positions in USD/JPY. Daily chart oscillators are gaining positive traction, suggesting dip-buying interest near the 150.00 psychological level. However, a break below the 149.85–149.80 support zone could negate the positive bias and push the pair toward 149.25, with further downside potential to 149.00 and 148.65.
On the upside, resistance is seen at the monthly peak near 151.30, followed by the 200-day Simple Moving Average (SMA) at approximately 151.65. A sustained move above this level could trigger fresh buying interest, pushing USD/JPY toward 152.00 and potentially extending to 152.45–152.50 before testing the 100-day SMA at 153.00.
