Japanese Yen Recovers as Trade Tensions Revive Safe-Haven Demand

Japanese Yen Rebounds Slightly as Trade Tensions Fuel Safe-Haven Demand

Published: July 11, 2025
Category: Forex | Central Banks | Trade News

JPY Regains Ground Amid Risk-Off Mood

The Japanese Yen (JPY) is attempting to recover from multi-week lows against the US Dollar (USD) during early European trading on Friday. The rebound is driven by growing global trade fears, which are supporting demand for safe-haven assets.

Trade Tensions Escalate as US Targets Japan

US President Donald Trump has announced a 25% tariff on all Japanese exports to the US, effective August 1, eliminating any chance of an extension to the current tariff deadline. This has stoked fears about the Japanese economy, already grappling with weak domestic demand and declining real wages.

The tariffs could further dent Japan’s export-driven economy and prompt the Bank of Japan (BoJ) to keep interest rates unchanged for the rest of the year.

BoJ Rate Hike Expectations Fade

With inflationary pressures easing and the economy facing fresh headwinds, rate hike expectations for the BoJ have diminished significantly. This has placed additional downside pressure on the Yen, despite intermittent safe-haven support.

Domestic Political Concerns Weigh on Yen

Political instability within Japan is another factor eroding investor confidence in the JPY. This internal uncertainty, coupled with external trade shocks, suggests the JPY may remain under pressure in the near term unless safe-haven demand intensifies.

USD/JPY Holds Near Two-Week Highs

The USD remains firm, hovering near a two-week high, as Federal Reserve (Fed) policymakers signal less urgency to cut interest rates. This sentiment continues to support the USD/JPY pair, even as the Yen trims losses.