On Tuesday, Japan's January unemployment rate unexpectedly rose from 2.4% to 2.5%, while in the fourth quarter of last year, corporate spending on factories and equipment decreased by 0.2%, marking the first decline in three years. These data indicate that Japan's economic recovery is facing resistance, triggering a market sell-off of the yen.

However, the market still generally expects the Bank of Japan to raise interest rates in the first half of this year, and the yield of Japanese 10-year treasury bond bonds has risen to the highest level since 2009, providing some support for the yen.

US pressure on Japan's exchange rate policy, safe haven demand supports yen

US President Trump recently stated that he has warned Asian countries not to devalue their currencies against the US dollar, believing that this will harm US economic interests. In addition, Japanese Finance Minister Katsuyuki Kato responded that the Japanese government does not pursue a policy of currency depreciation and has confirmed its monetary policy stance with the US Treasury Secretary.

This statement eased market concerns about possible intervention by the Japanese government in the foreign exchange market, and also kept the yen relatively stable with the support of safe haven demand.

Market pays attention to Federal Reserve policies

The latest data shows that the Institute for Supply Management (ISM) manufacturing PMI for February fell from 50.9 to 50.3, indicating a slowdown in manufacturing growth. In addition, due to the impact of import tariffs, the payment price index rose to 62.4, approaching a three-year high, indicating increased inflationary pressure.

The market is concerned that Trump's policies may exacerbate inflationary pressures and suppress manufacturing activity, which could prompt the Federal Reserve to take further interest rate cuts, thereby suppressing the US dollar.

From a technical perspective, the USD/JPY has fallen below the key support level of 150.00, indicating that there is still downward pressure in the short term. At the same time, the volatile indicators on the daily chart are still in the negative zone and have not yet entered an oversold state, indicating that there is still room for further decline in the exchange rate.

Edit viewpoint

In the short term, weak economic data in Japan has put pressure on the yen, but safe haven demand and expectations of a possible interest rate hike by the Bank of Japan still provide support for the yen. If the market continues to expect the Federal Reserve to cut interest rates, the US dollar may further weaken, pushing the US dollar/Japanese yen down.