08 Apr 2025

The Japanese Yen is experiencing interest from dip-buyers, recovering some of its losses from the previous night. Expectations of a rate cut by the Bank of Japan (BoJ) and increasing fears of a recession are driving safe-haven investments towards the JPY.

As the Japanese Yen (JPY) maintains a positive outlook against a generally weaker US Dollar (USD), the USD/JPY pair remains subdued below the mid-147.00s as the European session approaches on Tuesday. Strengthening expectations that the BoJ will persist in raising interest rates in 2025, alongside indications of widespread domestic inflation, are helping the JPY regain momentum and break a two-day decline. Additionally, concerns regarding the potential economic repercussions of US President Donald Trump's extensive reciprocal tariffs are contributing to the JPY's appeal as a safe haven.

Nevertheless, fears that stricter US tariffs could adversely affect Japan's economy, combined with a slight improvement in global risk sentiment, may limit the JPY's gains. Conversely, the USD is facing new selling pressure as speculation grows that a slowdown in the US economy, driven by tariffs, could compel the Federal Reserve (Fed) to initiate a new cycle of rate cuts. This situation highlights a significant divergence from the hawkish expectations surrounding the BoJ, suggesting that the lower-yielding JPY is likely to trend upward, which could further weaken the USD/JPY pair.