The appreciation trend of the yen exchange rate has been suspended

On the foreign exchange market on April 17, the yen exchange rate against the US dollar once appreciated to the range of 1 US dollar to 141 yen, and then fell to the latter half of 142 yen. On the morning of the same day, the first tariff negotiation between Japan and the United States ended. As it was reported that the two sides did not discuss the exchange rate issue, the trend of yen appreciation and dollar depreciation that had been continuously promoted was temporarily suspended. However, the market remains highly alert to the situation that the United States may advocate “correcting the depreciation of the yen”.

“There was no mention of the exchange rate issue,” Japanese Minister of Economic and Fiscal Revitalization Ryomasa Akasawa told the media after the Japan-US talks ended on the morning of the 17th.

On the morning of the same day, the yen exchange rate once rose to around 141.60 yen. However, after Ryomasa Akasawa spoke, the exchange rate fell back to the middle of 142 yen after 9 am. Subsequently, the yen continued to be sold and the US dollar buying spread, once reaching around 142.80 yen.

In the foreign exchange market, as it was previously expected that the US side would propose to correct the depreciation of the yen in this meeting, the market continued to see a trend of selling the US dollar. The Trump administration has expressed concerns about the dollar’s overstrength, and Trump has criticized Japan for “guiding currency depreciation.” U.S. Treasury Secretary Benson also said last week that the appreciation of the yen is a “natural trend.”

Before the Japanese tariff consultations, Trump suddenly decided to attend the meeting in person, further exacerbating market concerns about “correcting the depreciation of the yen.” For this reason, when it was confirmed that the exchange rate was not discussed, the market saw a reassuring buy to cover the dollar.

Although the appreciation of the yen has been temporarily suspended, the market’s vigilance against correcting the depreciation of the yen has not been completely eliminated. Because there has been no substantial change in the U.S. attitude during this meeting. Hiroshi Suzuki, chief exchange rate strategist at Sumitomo Mitsui Banking Corporation, said: “This Japan-U.S. meeting alone is not enough to create an environment for actively buying the dollar.”

Regarding future exchange rate issues, it is expected that Japanese Finance Minister Katsunobu Kato and U.S. Treasury Secretary Benson will discuss it between him. Kato is expected to travel to the United States from April 22 to attend the G20 Finance Ministers and Central Bank Governors Meeting, and it is expected that further consultations may be promoted at that time.

Matsui Securities market analyst Suzuki Sho pointed out: “From a global perspective, Japan’s interest rates are low, and the United States may ask the Bank of Japan to maintain its interest rate hike trend.” He believes that the market will continue to be highly sensitive to the pressure of yen appreciation.

The focus at present is whether the US dollar against the yen will break through the psychological barrier of 1 dollar to 140 yen. If the US side strengthens its demands for correcting the depreciation of the yen in the future, some people in the market even believe that “the exchange rate may appreciate to around 130 yen” (a foreign exchange trader at a domestic bank in Japan).

Akazawa Ryomasa also revealed that the United States said it “hopes to reach a deal within 90 days.” At least during this period of time, the foreign exchange market will have to maintain a defensive posture against the appreciation of the yen due to US pressure.