Japanese Yen Weekly Forecast: Sub-140 in View Amid Tariff Fears and BoJ Rate Bets

USD/JPY Sinks as Dollar Assets Tumble on Tariff Shock

US dollar assets slid after President Trump’s tariff announcements, driving demand for safe-haven assets, including the Japanese Yen. The USD/JPY tumbled to a low of 142.048 before ending the week at 143.437, down 2.36%.

President Trump announced a reversal on reciprocal tariffs for countries not retaliating but hiked levies on Chinese imports to 145%, fueling recessionary fears. Notably, tariffs on Japan dropped from 24% to 10%.

Looking ahead, tariff developments will continue impacting the USD/JPY pair as the focus turns to the negotiating table. Talks between the US and Japan and the US and China could influence near-term USD/JPY trends. However, investors must consider central bank forward guidance and key economic indicators in the upcoming week.

Machinery Orders Put Business Sentiment in Focus

Japan’s machinery orders will give insights into business sentiment across Japan’s manufacturing sector. Economists forecast orders to rise 1.1% in February after sliding 3.5% in January.

A larger-than-expected rise in orders may indicate improving business sentiment, potentially boosting job creation and wages. Rising wages could fuel household spending and demand-driven inflation, supporting a more hawkish BoJ stance. On the other hand, a weak print might reinforce caution, especially as policymakers assess tariff impacts.

Japan’s Trade Balance in the Spotlight

Japan’s trade terms will likely draw greater scrutiny as Trump targets export-driven economies. Economists expect Japan’s trade balance to fall from a ¥584.5 billion surplus to a ¥100 billion deficit.

The key focus will be on Japan’s import and export trends with the US. In February, Japan’s trade surplus with the US stood at ¥918.9 billion, representing 20% of total exports. Given Japan’s trade-to-GDP ratio of around 50%, trade negotiations could be crucial for Japan’s economic outlook. Failed talks and higher tariffs may impact the economy and temper BoJ rate hike bets. A breakthrough trade deal, however, could support a hawkish tilt.

Will Inflation Pressure the BoJ?

On Friday, April 18, Japan’s national inflation could prove pivotal. Economists expect the annual inflation rate to remain at 3.7% in March while forecasting core inflation to rise from 3% in February to 3.2% in March.

Hotter-than-expected inflation could boost bets on a BoJ rate hike in H1 2025. Conversely, softer inflation may delay further policy tightening, allowing the bank to consider tariff developments.

USD/JPY Outlook: Volatility Risks Ahead

Markets face a volatile week as traders weigh global trade tensions, BoJ policy clues, and the carry trade outlook.

• A deepening global trade war would boost Yen demand, pressuring the USD/JPY. Progress in negotiations, by contrast, might reduce recession fears, weakening Yen demand.
• BoJ support for a near-term rate hike would narrow the US-Japan rate differential, potentially sending the USD/JPY pair below 140. A dovish BoJ stance could drive the pair toward 148.280.
• A USD/JPY drop below the September 2024 low of 139.576 could accelerate the Yen carry trade unwind.

USD/JPY Scenarios

Key economic data from Japan and BoJ forward guidance will be crucial.

• Bullish Yen Scenario: Upbeat data, a hawkish BoJ stance, and an escalation in the global trade war could drag USD/JPY below 140.
• Bearish Yen Scenario: Weak Japanese data, a dovish BoJ, and a de-escalation in the global trade war may push the pair above last week’s high of 148.280.

US Indicators in Focus

Trade remains the dominant theme, but US data could shift sentiment. Key releases include:

• Retail sales (April 16).
• US Initial Jobless Claims (April 17).
• Fed Speakers.

Economists forecast retail sales to rise 1.3% month-on-month in March, up from a 0.2% increase in February. A sharp rise in retail sales could impact expectations of a June Fed rate cut as tariff-driven inflation concerns intensify. However, an unexpected fall in retail sales could boost bets on a Fed rate cut to support the US economy.

Economists expect initial jobless claims to increase from 223k (week ending April 5) to 224k (week ending April 12).

A sharp increase above 250k could drive speculation about a US recession, potentially supporting a more dovish Fed stance. Conversely, an unexpected drop may dampen expectations for an H1 2025 Fed rate cut.

Beyond the data, FOMC members’ commentary could give insights into the Fed’s policy stance and views on tariffs.

Potential Price Scenarios:

• Bullish US Dollar Scenario: Easing trade tensions, stronger retail sales, lower jobless claims, or hawkish Fed rhetoric could drive USD/JPY toward 150.
• Bearish US Dollar Scenario: An escalating trade war, higher claims, softer retail sales, or dovish Fed chatter may push USD/JPY below 140.

Short-term Forecast:

USD/JPY trends this week will hinge on:

• Trade developments.
• Japan’s trade and inflation data.
• US retail sales and jobless claims.

USD/JPY Price Action

Daily Chart

On the daily chart, the USD/JPY remains below the 50-day and the 200-day EMAs, signaling bearish momentum.

A break above 145 could signal a move toward the 149.358 resistance level. A sustained climb above 149.358 may bring the 50-day EMA into play.

Conversely, a move below last week’s low of 142.048 could expose the September 2024 low of 139.576

Final Thoughts

The coming week will likely bring heightened volatility for USD/JPY. Markets will digest trade headlines, central bank cues, and economic data. The currency pair’s trajectory will depend heavily on tariff signals and policy commentary.

For a deeper dive, explore our technical analysis here.