HG MARKETS:

The Japanese yen appreciated toward 145 per dollar on Wednesday, marking its second consecutive session of gains. This uptick in the yen’s value comes amid a combination of factors, including growing concerns about the global economic impact of US President Donald Trump’s trade policies and a general weakening of the US dollar. As fears about the escalating trade war between the United States and other nations, particularly Japan, mount, investors have increasingly turned to the yen as a safe-haven currency, further fueling its rise.

Trump’s implementation of sweeping tariffs has intensified worries about the potential for a global economic slowdown. The new tariffs, which include a 24% levy on Japanese goods and a 25% duty on car imports to the United States, have heightened concerns over the future of international trade. With trade tensions continuing to escalate, the uncertainty surrounding economic growth prospects has led many investors to seek the relative stability of the yen, which is traditionally seen as a safe-haven asset during times of geopolitical or economic stress.

Additionally, the yen has benefited from a broader weakness in the US dollar. As Trump’s trade war with major trading partners shows no signs of abating, fears of a potential US recession have increased. A slowdown in the US economy could prompt the Federal Reserve to implement further interest rate cuts, which would likely exert downward pressure on the dollar. With the prospect of lower US interest rates and the growing risks of a global recession, the yen has become a more attractive option for investors seeking a store of value.

The trade dispute has prompted Japan to take action as well. In a bid to mitigate the effects of the tariffs, Japan has sent a team to the United States to negotiate on trade terms. Prime Minister Shigeru Ishiba reportedly told President Trump during a phone call that Japan would like the US to reconsider its tariff policies. This diplomatic response highlights Japan’s determination to protect its economy from the negative impacts of rising trade barriers.

On the domestic front, Japan’s current account surplus surged to a record high in February, further boosting the yen. This impressive surplus was driven by strong export growth and a significant decline in imports, underscoring the resilience of Japan’s economy amid global trade challenges.

In conclusion, the Japanese yen’s recent appreciation is the result of a combination of domestic economic strength and global uncertainties driven by the escalating US trade war. As the situation continues to unfold, the yen is likely to remain a focal point for investors navigating the turbulent landscape of international trade and economic instability.