The Japanese Yen (JPY) sticks to its positive bias through the Asian session on Thursday as fading hopes for a quick resolution to the US-China tradeoff underpin demand for traditional safe-haven assets. Furthermore, expectations that Japan will strike a trade deal with the US and bets for more interest rate hikes by the Bank of Japan (BoJ) turn out to be other factors that lend some support to the JPY. Apart from this, a modest US Dollar (USD) downtick keeps the USD/JPY pair depressed below the 143.00 round-figure mark.
Meanwhile, signs of receding trade tensions between the US and China, along with easing fears about the Federal Reserve's (Fed) independence, remain supportive of a positive tone around the equity markets. This is holding back traders from placing aggressive bullish bets around the JPY and acting as a tailwind for the USD/JPY pair. However, the fundamental backdrop and the divergent BoJ-Fed monetary policy expectations suggest that the path of least resistance for the lower-yielding JPY remains to the upside.
Japan's Finance Minister Katsunobu Kato told G7 countries on Thursday that US tariffs are highly disappointing and creating uncertainties in financial market. Meanwhile, Japan's Economic Revitalization Minister Ryosei Akazawa will visit the US for tariff talks from April 30.
Bank of Japan Governor Kazuo Ueda said last week that the central bank may need to take policy action if US tariffs hurt the Japanese economy. Moreover, reports suggested that the BoJ will cut its economic growth forecasts and warn of escalating risks from Trump's sweeping trade tariff.
Investors, however, seem convinced that the BoJ will continue raising interest rates in 2025 amid the broadening inflation in Japan, which has been running at or above the 2% target for around three years. This marks a big divergence in comparison to dovish Federal Reserve expectations.
Source: Fxstreet
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