Japanese Yen Under Pressure as USD Strengthens, But Downside Looks Limited

USD/JPY Rises as Japanese Yen Struggles Amid USD Strength

The Japanese Yen (JPY) remains under pressure in early European trading on Wednesday, declining further against the US Dollar (USD). The USD/JPY pair currently trades higher, fueled by a stronger Greenback and diminished safe-haven appeal.

Trump Tariff Threat Adds Pressure

Sentiment shifted further against the Yen after US President Donald Trump threatened new tariffs on Japanese imports, raising concerns about renewed trade tensions. This has dampened investor confidence in the Yen's near-term stability.

Safe-Haven Demand Weakens

A positive risk environment has also weighed on the JPY, which traditionally benefits during market uncertainty. The recent rise in US yields and growing confidence in the US economy support the USD’s rally, adding to JPY losses.

Divergent Fed-BoJ Outlook Could Limit USD/JPY Gains

While the Federal Reserve considers easing monetary policy, the Bank of Japan (BoJ) is still expected to gradually shift from its ultra-loose stance. Japan’s inflation staying above the 2% target for nearly three years fuels speculation of upcoming BoJ tightening — a factor that could cap the USD/JPY upside.

Related Tredu Reads:

• What Drives the Yen as a Safe-Haven?
• BoJ vs Fed: A Divergent Policy Path
• How Tariff Talks Impact Forex Markets