Japanese Yen Plunges
According to FXStreet, on February 12, the Yen (JPY) continued its downward trend this week, marking the third consecutive day of depreciation. In today's trading session, JPY fell to its lowest level in a week against the USD. The main reason came from concerns that US President Donald Trump's no-exempt import tax policy could affect Japan's economic recovery. In addition, the optimistic sentiment in the market also made JPY - considered a safe haven asset - less attractive.
Meanwhile, Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank has no immediate plans to cut interest rates. He is concerned that Trump's trade policies could lead to higher inflation. This has sent the dollar higher, pushing the USD/JPY pair above 153.00. However, the Bank of Japan's (BoJ) interest rate hike plan could help the JPY hold its ground as traders await U.S. inflation data.
President Donald Trump inflames trade tensions, JPY under great pressure
President Donald Trump has just signed an executive order imposing a 25% tariff on imported steel and aluminum starting March 12. He also hinted at the possibility of imposing additional tariffs on cars, pharmaceuticals and computer chips, and pledged to introduce reciprocal tariffs to "counter" other countries' tax policies on US goods.
The news immediately raised concerns about escalating global trade tensions, which could negatively impact the Japanese economy. This put the JPY under strong downward pressure, while USD/JPY continued to recover from a two-month low (below 151.00) last week.
Japanese Finance Minister Katsunobu Kato said Wednesday morning that he would assess the impact of U.S. tariffs on the Japanese economy and take appropriate countermeasures. Meanwhile, Japanese Industry Minister Yoji Muto asked the U.S. to exempt Japan from steel and aluminum tariffs, but the move did not appear to be enough to stem the yen's decline.
On the other hand, Fed Chairman Jerome Powell, in his testimony before the Senate Banking Committee on Tuesday, made some rather hawkish remarks. He affirmed that the US economy remains strong, the labor market is stable, and inflation, although close to the 2% target, is still higher than expected. This shows that the Fed is in no hurry to cut interest rates.
Meanwhile, Bank of Japan (BoJ) Governor Kazuo Ueda continued to emphasize that the BoJ will conduct monetary policy flexibly to achieve its 2% inflation target. The latest data on wage growth and rising inflationary pressures may prompt the BoJ to make another interest rate hike at its March policy meeting.
All eyes are now on the upcoming US consumer inflation data, along with Powell’s subsequent remarks. The headline US consumer price index (CPI) is expected to rise 2.9% year-on-year in January, while the core CPI (excluding food and energy) is expected to rise 3.1%. These numbers will determine the next direction for the US dollar and the USD/JPY pair.
According to Lao Dong's records at 12:00 on February 12, 2025, the Yen decreased to 153.690 USD/JPY.
