Japanese Yen Strengthens on Hawkish BoJ Tankan Survey Amid Trade Tensions

Japanese Yen Bulls Hold Firm on Hawkish BoJ Outlook and Trade Headwinds

The Japanese Yen (JPY) continues to show strength early in the European trading session, holding near a three-week high against the US Dollar (USD). The recent Bank of Japan (BoJ) Tankan Survey revealed improving business confidence among large manufacturers in Japan for the first time in two quarters during April-June 2025. Moreover, firms expect customer prices to remain above the BoJ's 2% inflation target for the next five years, reinforcing expectations for further interest rate hikes by the central bank.

Despite ongoing US-Japan trade tensions and President Donald Trump’s threats of additional tariffs, JPY bulls remain confident. Japanese Chief Trade Negotiator Ryosei Akazawa warned that such tariffs would severely harm the Japanese economy, but this has not weakened the safe-haven appeal of the Yen.

At the same time, the US Dollar remains under pressure near multi-year lows amid market bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon. This dovish Fed outlook supports the lower-yielding Yen, keeping the USD/JPY pair under pressure around the mid-143.00 levels.

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