USD/JPY jumps to near 146.30 as Trump threatens 25% tariffs on Japan
- USD/JPY moves higher to near 146.30 amid broader underperformance by the Japanese Yen.
- US President Trump threatens to impose 25% tariffs on imports from Japan and South Korea.
- Traders are likely to pare BoJ hawkish bets as Japan fails to close deal with the US during the tariff extension period.
The USD/JPY pair climbs to near 146.30 during the European trading session on Tuesday. The pair gains as the Japanese Yen (JPY) underperforms across the board, following the announcement of 25% reciprocal tariffs by United States (US) President Donald Trump on imports from Japan.
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | 0.19% | 0.22% | -0.20% | -0.71% | -0.23% | -0.11% | |
| EUR | 0.11% | 0.31% | 0.36% | -0.08% | -0.61% | -0.11% | 0.00% | |
| GBP | -0.19% | -0.31% | 0.06% | -0.39% | -0.92% | -0.42% | -0.30% | |
| JPY | -0.22% | -0.36% | -0.06% | -0.43% | -0.94% | -0.41% | -0.23% | |
| CAD | 0.20% | 0.08% | 0.39% | 0.43% | -0.54% | -0.03% | 0.10% | |
| AUD | 0.71% | 0.61% | 0.92% | 0.94% | 0.54% | 0.51% | 0.63% | |
| NZD | 0.23% | 0.11% | 0.42% | 0.41% | 0.03% | -0.51% | 0.12% | |
| CHF | 0.11% | -0.00% | 0.30% | 0.23% | -0.10% | -0.63% | -0.12% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
On Monday, US President Trump unveiled new tariff rates for 14 countries that failed to ink a trade pact with Washington during the 90-day tariff pause. Out of them notable reading was 25% tariff on Japan and South Korea who are key trading partners of Washington.
The imposition of additional import duties on Japan by the US despite long trade negotiations between nations has pushed the Japanese Yen on the backfoot.
Additionally, US President Trump has also threatened to raise tariff further if countries retaliate.
The failure of US-Japan trade deal during the 90-day pause timeline has jeopardized market expectations that the Bank of Japan (BoJ) could raise interest rates again.
Meanwhile, the announcement of reciprocal tariffs by Donald Trump has also weighed on the US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, corrects to near 97.35 from the weekly high of 97.67 posted on Monday.
Investors expect the tariff policy to be inflationary for the US economy as the impact of higher duties will be borne by domestic importers who will pass on them to end consumers. This scenario would restrict the Federal Reserve (Fed) from unwinding monetary policy restrictiveness.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.