The Japanese yen remained under pressure as traders showed little conviction in pushing the currency higher despite concerns over new U.S. tariffs under Donald Trump’s potential return to the White House. While trade tensions have historically driven demand for the yen as a safe-haven asset, the market reaction has been muted, suggesting uncertainty over how Japan’s economy will absorb potential trade shocks.
Investors remain cautious as speculation grows around Trump’s proposed tariffs, which could target key sectors in Asia, including Japanese exports. While protectionist policies typically weaken the U.S. dollar, the yen has failed to capitalize on the uncertainty, weighed down by Japan’s own economic challenges and the Bank of Japan’s ultra-loose monetary stance.
The yen’s sluggish performance also reflects the broader risk sentiment, with investors instead turning to the U.S. Treasury market for safety. Rising bond yields have bolstered the dollar, limiting any significant yen appreciation. Meanwhile, expectations for a gradual shift in the Bank of Japan’s policy have yet to generate enough confidence among traders to bet on sustained yen strength.
USD/JPY 1-D Chart as of February 11th, 2025 (Source: TradingView)
Market participants are watching for any signs of Japanese government intervention, particularly if yen depreciation accelerates and threatens economic stability. Previous currency interventions by Japanese authorities have been sporadic, but growing uncertainty around trade policies could force officials to step in if the yen weakens excessively.
For now, the yen’s path remains uncertain, with its movement largely dictated by global trade negotiations and central bank policy shifts. Unless Japan signals a more decisive policy shift or Trump’s tariff plans become clearer, traders are likely to remain hesitant, keeping the yen in a narrow trading range for the foreseeable future.
