Yen volatility persists as US tariff concerns and uncertainty affect market

The Japanese yen continued to face some volatility. Stronger bond yields could provide some support to the currency as the 10-year government bond yield approached 1.6%.

Japan’s government has voiced concerns over the potential fallout from the newly announced U.S. tariffs, particularly the 25% tariff on imported vehicles.

This move could significantly impact Japan’s auto industry, which generates JPY 6 trillion (USD 63 billion) annually from U.S. car sales. The tariffs could reduce Japan’s GDP by 0.2% this year, adding strain to Japan’s export-driven economy. The uncertainty surrounding trade relations could result in further depreciation of the yen.

Meanwhile, the Bank of Japan’s (BoJ) monetary policy path could be impacted by these trade disruptions. As such, the yen’s trajectory remains clouded by the potential for further delays in tightening. Additionally, the currency could face further downward pressure if the economic strain intensifies.

Looking ahead, market participants are closely awaiting Tokyo’s core CPI, expected to remain unchanged at 2.2% year-on-year, as well as potential retaliatory actions from Japan. The yen’s outlook remains tied to global trade developments, and the currency will likely stay volatile amidst trade uncertainties.