On April 9, 2025, the Bank of Japan released data showing that the PPI in March increased by 0.4% month-on-month and 4.2% year-on-year, exceeding market expectations. This data indicates that upstream price pressures have intensified, which may further push up the Consumer Price Index (CPI), possibly forcing the Bank of Japan to consider interest rate hikes or withdrawing ultra-loose monetary policy in future meetings.
The market reacted quickly, with analysts pointing out that if the PPI continues to rise, it will put more pressure on the Bank of Japan to raise interest rates. This attracted new buyers for the yen during the Asian trading session, with USD/JPY briefly falling below the 147 mark. The yen's strong performance reflects market expectations of changes in Japanese monetary policy and confidence in the country's economic and financial policy outlook.
After a phone call between Trump and Japanese Prime Minister Shigeru Ishiba, both parties agreed to initiate formal trade negotiations. U.S. Treasury Secretary Bessent also stated that Japan might become a priority for tariff negotiations. This news further boosted market confidence in the stability of U.S.-Japan bilateral relations and trade cooperation prospects. Investors generally believe this will help stabilize Japan's export environment and benefit the yen's performance.
Additionally, Trump announced a 90-day suspension of tariffs for most economies, which rapidly improved market risk sentiment. The U.S. stock market responded with a surge, as the S&P 500 index soared 9.5%, marking the largest single-day gain since 2008. Although the dollar rebounded in the short term, its trajectory was limited by expectations of Federal Reserve rate cuts. Meanwhile, demand for the yen as a safe haven currency cooled off as the stock market rebounded.
Technical analysis shows that USD/JPY has repeatedly failed to break the 148 level, with momentum indicators such as RSI remaining in the negative range, indicating the market has not entered an oversold state. Short-term support is near 146.00, and if breached, it might test the psychological level of 145.00. Resistance lies between 147.75 and 148.00, with a breakout potentially testing 149.00 and 150.00.
FOMC meeting minutes indicate that Federal Reserve officials are concerned that tariff policies might drive up inflation, but they are inclined to cut rates cautiously. The market widely expects the Fed to begin cutting rates in June, with a total of 75 basis points for the year. Meanwhile, expectations for a rate hike in Japan are gradually becoming clearer, which might reduce the dollar's appeal against the yen.
In the short term, the yen is supported by Japan's PPI data and improved U.S.-Japan trade prospects. However, the rebound in global market risk sentiment, especially in risk asset markets, may gradually suppress the trend of safe-haven money flowing into the yen. In the medium term, a reversal of U.S.-Japan interest rate differentials might lead to a pullback in USD/JPY, but if U.S. inflation data remains strong, there remains the possibility of the dollar advancing again towards the 148-149 range against the yen.
