Japanese Yen Slips as USD/JPY Climbs Amid Trade Concerns and Dovish BoJ Outlook

Key Highlights:

• Japanese Yen weakens on disappointing trade balance data and easing BoJ rate hike expectations
• USD/JPY breaks above 148.50 as risk sentiment improves and USD demand strengthens
• Political uncertainty and looming US tariffs further pressure JPY

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USD/JPY Gains Momentum on Weak Yen and Strong Dollar

The Japanese Yen (JPY) extended its losses during Thursday’s Asian session, allowing the USD/JPY pair to push beyond the 148.50 mark. This upward momentum is largely driven by fresh buying interest in the US Dollar and a sharp dip in Japanese trade surplus figures.

Japan reported a June trade surplus of ¥153.1 billion, falling short of the expected ¥353.9 billion and highlighting a worrying second monthly drop in exports, especially to China. At the same time, imports ticked up by 0.2% YoY, signaling a modest recovery in domestic demand. However, broader concerns — such as declining real wages, cooling inflation, and weak GDP growth — are casting doubt over the Bank of Japan’s ability to pursue aggressive policy tightening.

BoJ Rate Hike Expectations Fade as Political Risks Rise

The JPY also faces headwinds from growing political uncertainty. With elections looming, Japan’s ruling coalition (LDP and Komeito) risks losing its Upper House majority, which could undermine fiscal stability and trade negotiations. Meanwhile, the US-Japan trade relationship is on shaky ground as President Trump pushes ahead with 25% tariffs on Japanese exports, increasing fears of a deeper trade rift.

In this uncertain climate, investors now expect the BoJ to hold off on interest rate hikes through 2025, especially with inflation showing signs of softening.

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USD Strength Supported by Hawkish Fed Rhetoric

Across the Pacific, the US Dollar remains strong after pulling back slightly on Wednesday. Optimism surrounding the Fed’s cautious stance on rate cuts—especially amid persistent inflation risks due to rising tariffs—has lifted the greenback. New York Fed President John Williams and Dallas Fed President Lorie Logan both indicated that the current rate levels may need to stay elevated longer to keep inflation anchored.

Adding to the bullish sentiment for the USD, President Trump denied reports of plans to fire Fed Chair Jerome Powell, although he reiterated his dissatisfaction and said he’d prefer Powell resign voluntarily. This political drama adds further volatility to the USD/JPY outlook.

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USD/JPY Technical Outlook: Eyeing 149.00 and Above

Technically, USD/JPY has regained strength above its 100-hour Simple Moving Average (SMA). Momentum indicators remain bullish and far from overbought, suggesting more upside is possible.

• Immediate resistance lies at 149.00, followed by a test of the 149.15–149.20 swing high
• Psychological level at 150.00 remains in sight if momentum continues
• On the downside, 148.00 offers initial support, with stronger zones at 147.70 and 146.60, where the 100-day SMA sits near 145.80

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What to Watch Next

Traders should monitor:

• US macro releases including Retail Sales, Initial Jobless Claims, and the Philly Fed Manufacturing Index
• Further remarks from key FOMC members
• Japan’s National CPI release on Friday for fresh inflation insights

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