Japanese Yen Weekly Forecast: USD/JPY Eyes 140 as Global Trade War Stirs Volatility

USD/JPY Snaps Winning Streak on Tariff Shocks

A Trump tariff revival jolts USD/JPY into retreat, tumbling to 144.546, its lowest since the 2024 Yen carry trade unwind.

President Trump announced sweeping tariffs, including a 24% levy on Japanese goods. Unlike his first term, the response was swift, with major economies retaliating. This has heightened fears of a full-blown global trade war.

Rising tensions triggered a flight to safety, driving Japanese Yen demand. The USD/JPY ended the week down 1.94% at 146.904 after briefly touching 150.485.

Looking ahead, the focus will shift to trade developments and the Bank of Japan’s policy outlook.

Japan Wage Growth in Focus

Japan’s national wage growth figures on Monday, April 7, will likely influence USD/JPY and the BoJ’s policy stance. Economists forecast average cash earnings to rise 3.1% year-on-year (YoY) in February, up from 2.8% in January.

A higher wage reading could boost expectations for a May BoJ rate hike. Rising wages can fuel consumer spending and demand-driven inflation, supporting a more hawkish BoJ stance. Conversely, softer wages may temper bets on an H1 2025 BoJ move, impacting Japanese Yen demand.

In the spring wage negotiations (shunto), Japan’s Rengo negotiated a 3.84% base pay rise and achieved an average pay rise of 5.46%, exceeding last year’s figures. However, rising wages must convert into spending to justify a BoJ policy shift.

Consumer Confidence Crucial for Consumption

Consumer confidence data due April 9 may influence sentiment. Economists expect the Consumer Confidence Index to dip from 35.0 in February to 34.9 in March.

A sharper drop, reflecting concerns about US tariffs, could lower expectations of an H1 2025 BoJ rate hike. Weakening consumer confidence may signal reduced household spending, dampening inflationary pressures. However, an unexpected spike in confidence may support a more hawkish BoJ policy outlook.

Producer Prices and the Inflation Outlook

Japan’s producer prices on Thursday, April 10, may offer early clues on inflation trends. Economists forecast producer prices to increase 3.9% YoY in March, down from 4.0% in February.

As a leading inflation indicator, softer-than-expected figures could dampen BoJ rate hike bets. Producers typically adjust prices based on demand, and weak demand could filter into consumer price trends. Conversely, a higher reading could increase speculation of a near-term rate move.

A Precarious Week: Trade Developments, BoJ, and Carry Trade Risks

While Japan’s economic indicators will influence Japanese Yen demand and sentiment toward the BoJ’s rate path, trade developments may prove decisive.

Investors should consider several potential scenarios:

• An escalation in the global trade war would likely drive safe-haven demand, pressuring the USD/JPY, while positive negotiations could weaken Yen demand.
• Bank of Japan’s policy outlook will influence USD/JPY trends. Support for an H1 2025 rate hike would leave the USD/JPY pair on a downward trajectory. However, calls to delay further moves amid increasing economic uncertainty could drive USD/JPY higher.
• Risks of a Yen carry trade unwind heightened as the USD/JPY briefly dropped below 145.

Potential USD/JPY Moves

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 push USD/JPY toward 140. BoJ Governor Kazuo Ueda will speak on Wednesday, April 9.
• Bearish Yen Scenario: Weak Japanese data, a dovish BoJ, and a de-escalation in the global trade war may drive the pair past last week’s high of 150.485.

US Indicators in Focus

While the Japanese Yen will remain center stage, US indicators will also influence USD/JPY trends. Key reports include:

• FOMC Meeting Minutes (April 9).
• CPI Report (April 10).
• Initial Jobless Claims (April 10).
• Producer Prices (April 11).
• Michigan Consumer Sentiment (April 11).

Economists forecast the annual inflation rate to drop from 2.8% in February to 2.6% in March.

A hotter reading could validate Fed Chair Powell’s caution and delay Fed rate cuts, especially with tariffs adding to inflation. Conversely, softer inflation may bolster bets on a June Fed rate cut. US producer prices could also influence inflation trends and the timing of a Fed move.

Economists expect initial jobless claims to rise from 219k (week ending March 29) to 225k (week ending April 5).

A spike above 250k could trigger recession concerns, supporting a more dovish Fed rate path. Conversely, an unexpected fall in claims may lower bets on an H1 2025 Fed rate cut.

Consumer sentiment will also draw investor interest after March’s sharp drop in confidence. Economists forecast the Michigan Consumer Sentiment Index to fall from 57.0 in March to 54.5 in April.

Potential Price Scenarios:

• Bullish US Dollar Scenario: Strong inflation, lower claims, and improved consumer confidence could drive USD/JPY toward 150.
• Bearish US Dollar Scenario: Softer inflation, higher claims, and weaker consumer confidence may drag the USD/JPY toward 140.

Short-term Forecast:

USD/JPY trends this week will hinge on:

• Japan’s wage growth, consumer confidence, and producer price data.
• US inflation, labor market, consumer sentiment data.
• Central bank commentary.
• Global trade developments.

USD/JPY Price Action

Daily Chart

On the daily chart, the USD/JPY remains below the 50-day and the 200-day EMAs, affirming bearish price signals.

Despite last week’s pullback to 146.904, a breakout above 148 could support a move toward the 149.358 resistance level. A decisive move through 149.358 may enable the bulls to target the 50-day EMA.

Conversely, a drop below last week’s low of 144.546 would expose the October 2 low of 143.423, with 140.309 as the next key support level.

The 14-day Relative Strength Index (RSI) at 37.91 suggests a USD/JPY fall to 143 before entering oversold territory (RSI below 30).

Final Thoughts

Trade uncertainty, economic data, and central bank signals will likely sustain volatility in the USD/JPY. The path forward will hinge on policy clues and geopolitical developments.

For a deeper dive, explore our technical analysis here.