The Japanese Yen retreats after touching a one-week high against its American counterpart.
Rising bets for an imminent BoJ rate rise this year should limit any deeper losses for the JPY.
The narrowing US-Japan yield differential might also lend support to the lower-yielding JPY.

The Japanese Yen (JPY) attracts some sellers during the Asian session on Tuesday, which, along with a modest US Dollar (USD) uptick, assists the USD/JPY pair in staging a modest recovery from the 151.25 area or over a one-week low. Investors cheered a delay in the implementation of US President Donald Trump's reciprocal tariffs. This, in turn, is seen as a key factor undermining the safe-haven JPY. Any meaningful JPY depreciation, however, still seems elusive in the wake of rising bets for more interest rate hikes by the Bank of Japan (BoJ), bolstered by the release of robust Q4 GDP print from Japan on Monday.
Meanwhile, hawkish BoJ expectations led to a significant rise in Japanese government bond yields, to a multi-year high. Adding to this, the recent decline in the US Treasury bond yields, backed by expectations that the Federal Reserve (Fed) would cut interest rates further, has resulted in a narrowing of the US-Japan rate differential. This might further hold back traders from placing aggressive bearish bets around the lower-yielding JPY. Hence, it will be prudent to wait for strong follow-through buying before confirming that the USD/JPY pair has bottomed out and positioning for any further recovery.
Japanese Yen bulls have the upper hand amid hawkish BoJ expectations

US President Donald Trump said on Thursday that he plans to unveil reciprocal tariffs, which would aim at every country that charges duties on US imports, though he stopped short of giving any details.
Furthermore, the optimism over talks between the US and Russia aimed at ending the war in Ukraine boosted investors' confidence and undermined demand for the safe-haven Japanese Yen on Tuesday.
Against the backdrop of strong inflation figures from Japan, the solid Q4 Gross Domestic Product (GDP) released on Monday cemented the case for imminent rate hikes from the Bank of Japan this year.
Markets are now pricing in roughly another 37 basis points worth of increases by December, pushing the yield on the benchmark 10-year Japanese government bond to its highest level since April 2010.
Meanwhile, a surprise drop in US Retail Sales, along with mixed signals on inflation, suggests that the Federal Reserve could possibly cut interest rates at the September or October policy meeting.
Philadelphia Fed President Patrick Harker said on Monday that the labor market is largely in balance and the current economy argues for a steady policy as inflation has been sticky over recent months.
Fed Board of Governors member Michelle Bowman noted that high asset prices may have impeded progress on inflation and more certainty is needed on declining inflation before reducing rates.
Fed Board of Governors member Christopher Waller said that inflation progress last year has been excruciatingly slow and that rate cuts would be appropriate in 2025 if inflation repeats the 2024 pattern.
Nevertheless, Fed Funds Futures see a 40 basis point Fed rate cut in 2025, causing the recent decline in the US Treasury bond yields and contributing to the narrowing of the US-Japan rate differential.
Traders look to the release of the Empire State Manufacturing Index from the US, which, along with speeches by influential FOMC members, would drive the US Dollar and the USD/JPY pair.

Source: Fxstreet