Japanese Yen and Aussie Dollar Forecasts: Trump’s Liberation Day Tariffs in Focus

Will USD/JPY Volatility Spike on Trump’s Liberation Day?

On Wednesday, April 2, market risk sentiment may significantly impact USD/JPY trends as the focus shifts to Liberation Day tariffs.

Last week, President Trump announced a 25% tariff on all car imports into the US, effective April 2. Trump also warned that reciprocal tariff would be announced on Liberation Day, adding to the market uncertainty. The prospects of sweeping auto and reciprocal tariffs have fueled risk aversion, driving demand for safe-haven instruments, including the Japanese Yen and gold.

Despite rising geopolitical tension, the USD/JPY has remained above the March 11 low of 146.537. This resilience may reflect concerns about the negative impact of tariffs on demand for Japanese goods and sentiment toward the Bank of Japan rate path.

Why Is a 25% Tariff Auto Tariff Significant for Japan’s Economy?

Sweeping tariffs on auto imports into the US could deal a heavy blow to Japan’s labor market and economy.

According to the US Commerce Department’s International Trade Administration, Japan was the second largest exporter of vehicles to the US in 2024, with 1,377,086 vehicles. The impact of tariffs and the recent drop in USD/JPY could dent demand, affecting employment, wages, consumer sentiment, and private consumption in Japan. Weaker private consumption may dampen demand-driven inflationary pressures, potentially delaying BoJ rate hikes.

Conversely, if Trump U-turns on auto tariffs, markets could raise bets on an H1 2025 BoJ rate hike and lift Yen demand.

Japan’s auto sector plays a critical role in the economy as it:

• Accounts for almost 30% of total exports to the US.
• Contributes between 8-10% to Japan’s GDP.
• Crucial for Japan’s labor market and wage growth

Jeffrey J. Hall, PhD, Lecturer at Kanda University of International Studies, commented.

“It isn’t yet clear what tariffs are going to be announced on the 2 (April), but the Trump administration is already hurting its ally’s economy with a 25% tariff on automobiles.”

Japan’s economy could face more pressure if Trump targets other goods, including machinery, chemicals, plastics, rubber, and leather.

USD/JPY Trends to Watch:

• Bullish Yen scenario: Upbeat data from Japan and a Trump U-turn on tariffs could drag the USD/JPY pair toward the March 11 low of 146.537.
• Bearish Yen Scenario: Weak economic data from Japan and more sweeping tariffs impacting Japan’s economy could sink bets on an H1 2025 BoJ rate hike, driving the pair toward the 50-day EMA and 151.

US Economic Data and USD/JPY Outlook

Later in the US session, the US labor market will influence market bets on a June Fed rate cut and US dollar demand. Economists expect the ADP to report a 105k increase in employment in March, up from 77k in February.

• A higher-than-expected reading would likely lower bets on an H1 2025 Fed rate cut. A more hawkish Fed stance may push the USD/JPY pair toward the 50-day EMA. A break above the 50-day EMA and potentially extend toward the 200-day EMA.
• Lower-than-expected employment could fuel concerns over a US recession, supporting multiple Fed rate cut bets. A more dovish Fed stance may send USD/JPY toward the 149.358 resistance level. A drop below this level would signal a fall toward the March 11 low of 146.537.

Outside of economic data, tariff developments and FOMC member commentary will remain key drivers for the pair.

Explore expert forecasts and trade setups for USD/JPY in our latest market analysis here.

Aussie Dollar Outlook: Building Approvals in the Shadow of Tariff Updates

Turning to AUD/USD, Australia’s real estate sector is in focus. Building permits fell 0.3% month-on-month in February after soaring 6.3% in January.

Weaker demand for new homes could potentially pressure house prices. Falling home prices may adversely affect consumer confidence and spending, dampening demand-driven inflation. A softer inflation outlook could boost bets on an H1 2025 RBA rate cut, impacting Aussie dollar demand.

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, commented on the RBA’s interest rate decision and timing of a potential rate cut, stating:

“RBA left rates at 4.1% as exp citing easing underlying inflation but a still tight labour mkt & need to be more confident inflation will continue to fall. It still sees monetary policy as restrictive & will be data driven. We expect a May rate cut, with Mar qtr CPI on 30 Apr key.”

For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.

Australian Dollar Daily Outlook: US Labor Market and Tariffs in Focus

During the US session, hotter-than-expected labor market data could dampen expectations for multiple Fed rate cuts. A less dovish Fed rate path could widen the US-Aussie interest rate differential in favor of the US dollar. In this scenario, the AUD/USD could fall toward $0.62500.

Conversely, softer labor market data may fuel concerns about the US economy, signaling a more dovish Fed rate path. A narrower rate differential could push the AUD/USD pair above the 50-day EMA , potentially targeting the $0.63623 resistance level.

However, tariff developments could overshadow the data. Escalating trade tensions could fuel risk-off sentiment, driving US dollar demand and weighing heavily on AUD/USD. Risk aversion could drag the AUD/USD pair below $0.62500.

Key Market Trends

The main drivers of the forex market include:

• USD/JPY: Household spending and BoJ guidance amid shifting May BoJ rate hike bets.
• USD/JPY and AUD/USD: US labor market data, Services PMI data, and tariff developments.
• AUD/USD: China PMI data, Beijing’s stimulus measures, and global trade tensions.

Do not miss today’s trade setups in our full USD/JPY and AUD/USD reports.