- The USD/JPY is strengthened as markets continue to digest Trump’s reciprocal tariffs, scheduled to enter into force in August.
- The USD/JPY is still vulnerable to interest rate expectations, changing the focus towards FOMC minutes.
- A stronger American dollar or a greater weakness of Yen could lead to the USD/JPY to the maximum of June about 148.00.
The Japanese Yen (JPY) is weakening against the US dollar (USD) on Tuesday while the markets digest the latest tariff threats over Japan and weigh the possible perspectives of a commercial agreement.
At the time of writing, the USD/JPY torque is operating 0.42% higher in the day, heading towards the level of 147.00.
Commercial tensions persist after Trump’s 25% tariff threat against Japan
In a formal letter sent on Monday, the Trump administration informed Tokyo that all Japanese imports will face a 25% tariff from August 1.
Speaking at a conference in Tokyo on Tuesday, Japanese Prime Minister Shigeru Ihiba urged calm and reiterated Japan’s commitment to maintain open dialogue.
In the same event, the main commercial negotiator of Japan, Ryosei Akazawa, said: “The two countries must generate confidence through a sincere dialogue and reach common terrain step by step. Through such a process, my work as a negotiator is to agree a complete package as soon as possible.”
However, Akazawa emphasized that “it makes no sense to reach an agreement with the US without an agreement on car tariffs.”
Japan cars to the US are already subject to a 25%tariff, while aluminum and steel imports face a 50%rate. As an economy driven by exports, Japan is vulnerable to the reduction of US demand, adding more pressure to its fragile economic perspective.
The USD/JPY is still vulnerable to interest rate expectations, changing the focus towards FOMC minutes
In response, the Bank of Japan (BOJ) continues to pursue an ultra lax monetary policy, maintaining interest rates by 0.5% since it increased them in January. In marked contrast, the Federal Reserve (FED) has maintained its reference rate between 4.25% and 4.50%.
The Minutes of the Federal Open Market Committee (FOMC) meeting will be published on Wednesday. This report offers a deeper vision of the Fed position regarding inflation, monetary policy and possible future interest rate cuts. These details could help clarify the schedule for possible relief.
According to the CME Fedwatch tool, markets are currently valuing a 62.9% probability of a 25 basic points cut in September. If the minutes change these expectations, the resulting revaluation could act as a catalyst for the volatility of the USD/JPY.
The USD/JPY points to Fibonacci’s resistance in 147.14 As the bullish impulse gains traction
From a technical point of view, the USD/JPY is approaching the Fibonacci setback level of 38.2% of the January-April fall, providing resistance in 147.14.
USD/JPY DAILY GRAPH
A movement above this level could lead to the pair to test the maximum of June 148.03, potentially opening the way for a new proof of Mayo in 148.65. The 50% FIBO level is in 149.38, whose rupture could carry the psychological level of 150.00 to the focus.
The relative force index (RSI) is reading about 61, indicating a strong bullish impulse without the torque being considered technically overcaps.
However, if the USD/JPY goes back, a rupture below 146.00 could allow bassists to test the simple mobile average (SMA) of 50 days in 144.66, with the next large support level in 142.00.
Tariffs – Frequently Questions
Although tariffs and taxes generate government income to finance public goods and services, they have several distinctions. Tariffs are paid in advance in the entrance port, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and companies, while tariffs are paid by importers.
There are two schools of thought among economists regarding the use of tariffs. While some argue that tariffs are necessary to protect national industries and address commercial imbalances, others see them as a harmful tool that could potentially increase long -term prices and bring to a harmful commercial war by promoting reciprocal tariffs.
During the election campaign for the presidential elections of November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy. In 2024, Mexico, China and Canada represented 42% of the total US imports in this period, Mexico stood out as the main exporter with 466.6 billion dollars, according to the US Census Office, therefore, Trump wants to focus on these three nations by imposing tariffs. It also plans to use the income generated through tariffs to reduce personal income taxes.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
