Japanese Yen Gains on BoJ Rate Hike Expectations Amid US-China Trade Talks

Japanese Yen Gains on BoJ Rate Hike Expectations Amid US-China Trade Talks

The Japanese Yen (JPY) snapped its two-day losing streak on Monday, gaining mild intraday strength in the early European session. The USD/JPY pair dipped to around 144.20, pressured by a softer US Dollar (USD) and increased optimism around the Bank of Japan (BoJ) raising interest rates.

Upward Revision to Japan’s Q1 GDP Boosts BoJ Hike Bets

Japan's Cabinet Office revised its Q1 GDP upwards, with the economy showing better resilience than initially estimated. This positive surprise, coupled with widening inflationary trends in Japan, has strengthened expectations that the BoJ will continue to tighten monetary policy, supporting the Yen.

Geopolitical Risks and Safe-Haven Demand Support Yen

Ongoing geopolitical uncertainties and risk-averse sentiment in the markets have further boosted the Yen’s appeal as a safe-haven currency. Investors are cautious ahead of the high-stakes US-China trade talks scheduled in London, which are expected to influence global risk appetite.

US Dollar and Fed Rate Outlook Weigh on USD/JPY

Despite recent US labor market data signaling strength and reducing the odds of near-term Federal Reserve (Fed) rate cuts, the USD remains under pressure. This combination has contributed to USD/JPY’s modest decline. However, USD bears may remain cautious ahead of the trade discussions.

Related Reads on Tredu:

• BoJ Interest Rate Outlook and Impact on Yen
• US-China Trade Talks: What Markets Expect
• Forex Safe-Haven Currencies to Watch in 2025

Conclusion

The Japanese Yen’s positive bias is underpinned by better-than-expected economic data and persistent BoJ tightening bets, even as cautious market sentiment ahead of US-China trade talks tempers USD/JPY moves. Traders should monitor these evolving factors closely for short-term currency trends.