The USD/JPY pair posts a fresh three-week high near 151.00 during North American trading hours on Thursday. The pair strengthens amid significant weakness in the Japanese Yen (JPY). The Yen underperforms even though traders remain confident that the Bank of Japan (BoJ) will raise interest rates again this year.

BoJ hawkish bets have been driven by expectations of more wage hikes ahead. Last week, Japan's largest trade union group, Rengo, showed that firms agreed to raise pay growth by 5.4% this year.
Though investors have underpinned the US Dollar (USD) against the Japanese Yen, it is underperforming against other peers after the imposition of 25% tariffs on autos entering the United States (US) from President Donald Trump, which will become effective from April 2.

Market participants expect that Trump's tariffs will be unfavorable for the global economy, including the US. It will be US importers who will bear the burden of higher tariffs and will pass on to consumers. Such a scenario will be inflationary for the US economy, which will diminish the purchasing power of households.

Fears of a resurgence in inflationary pressures and a slowdown in the US economic growth have led Federal Reserve (Fed) officials to stay on the sidelines. On Wednesday, Minneapolis Fed Bank President Neel Kashkari said at the Detroit Lakes Chamber Economic Summit that the central bank should "just sit where we are for an extended period of time until we get clarity."

According to the CME FedWatch tool, the Fed is almost certain to keep interest rates in the current range of 4.25%-4.50% in the May policy meeting but see a 66% chance of a reduction in June.

Source: Fxstreet