The global risk aversion sentiment is heating up, once again driving the yen stronger, especially against the backdrop of escalating trade tensions and divergent policy paths between the Federal Reserve and the Bank of Japan.

The USD/JPY continued to weaken after opening this week, approaching its lowest point since September 2024. Previously, the United States' imposition of tariffs intensified market concerns about the global economic downturn.

When the global economy is facing shocks, the attractiveness of the Japanese yen as a safe haven currency remains prominent. "- Vanda Hari, founder of Vanda Insights

The policy divergence between Japan and the United States is one of the core drivers driving the sustained strength of the yen. The latest data shows that the annual wholesale inflation rate in Japan accelerated to 4.2% in March, indicating that domestic price pressures continue to exist in Japan;

Strong salary growth also provides a foundation for the Bank of Japan to continue raising interest rates; In sharp contrast, the US CPI significantly slowed down in March, strengthening market expectations for a 90 basis point rate cut by the Federal Reserve this year. "The narrowing interest rate differential has increased the relative attractiveness of the yen, especially against the backdrop of a weaker US dollar," - Daan Struyven, strategist at Goldman Sachs

The uncertainty in geopolitics and trade has further strengthened the safe haven role of the Japanese yen. Asian countries have imposed an 84% tariff on US goods, while the US president has raised tariffs on China to 145%, further escalating trade frictions;

Japanese Prime Minister Shigeru Ishiba has issued a warning: "The US tariff measures may disrupt the global economic order." Japanese Finance Minister Toshiichi Kato also stated that both the US and Japan agree that excessive exchange rate fluctuations are unacceptable;

Japanese Economy Minister Ryosuke Akazawa added that the exchange rate issue will be directly negotiated between Treasury Secretary Kato and US Treasury Secretary Scott Besant.

Trump stated last week that he is setting "fair but tough conditions" for trade negotiations with Japan; US Treasury Secretary Vincent also stated that Japan may become a priority in tariff negotiations, leading the market to believe that the US and Japan will avoid getting caught up in a trade conflict similar to that between the US and China.

Technically, there is still room for the US dollar to decline against the Japanese yen. The RSI indicator is approaching the oversold range and may experience consolidation in the short term; 142.00 is the key support level, and if it falls below, it will test the integer levels of 141.60, 141.00, and even 140.00 in sequence;

If it rebounds above 143.00, it may encounter strong resistance between 143.50-143.55, and only after breaking through can it be expected to challenge the area of 145.00 and above.

Editor's viewpoint:

Against the backdrop of continued inflows of safe haven funds into the yen, widening policy divergence, and rising endogenous inflationary pressures in the Japanese economy, the trend of yen appreciation may continue. The economic slowdown risk and falling inflation faced by the Federal Reserve further suppress the performance of the US dollar.

Unless there are significant positive developments in the US Japan trade negotiations and easing market risk appetite, it may be difficult for the US dollar to reverse its downward trend against the Japanese yen in the short term. Technical advice: Pay close attention to the 142.00 line. Once it falls, USD/JPY may start a new round of decline.