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USD/JPY is testing critical support around 139.50 after breaking below a flag-like channel, reaching last year's low of 139.50/138.90. Without signs of a rebound, further declines are possible, targeting projections at 136.50 and 134.80 if support fails to hold. The recent high of 144.30 serves as near-term resistance.
The Japanese yen has strengthened against the US dollar, nearing 140, primarily due to USD weakness rather than significant changes in Japan's economic indicators or Bank of Japan comments. Inflation remains above 3%, driven largely by food prices, yet the BoJ is poised to raise interest rates if economic conditions allow. Despite a 13% gain against the USD since January, the yen's performance against the euro has been modest, rising just under 1%.
Goldman Sachs predicts that the weakness of the dollar is likely to persist and deepen, driven by concerns over the US economy and potential recession risks. As foreign investors reassess US assets, there is a growing interest in diversifying into safe havens like gold, which recently reached $3,500 an ounce. Despite the dollar's dominant status in global trade, a shift towards a broader range of assets could further extend this dollar weakness.
Japanese Finance Minister KATO Katsunobu is set to meet US counterpart Scott Bessent, with the yen expected to be a key discussion point. Japan is unlikely to agree to US pressure for currency intervention or interest rate hikes, focusing instead on understanding US intentions regarding exchange rates amid ongoing trade negotiations. Both nations may ultimately seek common ground on stable exchange rates without committing to significant actions.
Tariff stress is expected to negatively impact the USD, with ongoing policy uncertainty likely to weaken market confidence and consumer sentiment. The USD is projected to decline, while the EUR and JPY present viable alternatives for diversification. The AUD is anticipated to recover in late 2025, supported by positive domestic growth and policy adjustments in China.
Gold prices surged past $3,500 an ounce for the first time, driven by concerns over President Trump's potential dismissal of Federal Reserve Chair Jerome Powell. This uncertainty led to a sell-off in US stocks, bonds, and the dollar, while safe havens like gold and the yen gained traction. Following Trump's calls for immediate interest rate cuts, the dollar fell to its lowest level since 2023.
Goldman Sachs Research indicates that US tariffs and rising trade tensions are weakening the dollar as GDP growth slows. The firm forecasts a 10% decline against the euro and nearly 9% against the yen and pound over the next year, attributing this to eroding consumer confidence and profit margins for US firms. Concerns over federal spending cuts and a weakening labor market further contribute to a shaky economic outlook, altering global perceptions of US assets.
Plug and Play Japan has launched its inaugural fund, “Plug and Play Japan Fund I,” aimed at supporting local startups and addressing their limited access to global markets. With an initial closing of over 3 billion yen (approximately US$21.1 million), the fund plans to allocate 80% to Japanese startups and 20% to international ones that align with Japan’s market, targeting a total of 5 billion yen (around US$35.1 million). This initiative reflects a growing recognition of the need for stronger connections to international markets for Japanese startups, which currently face challenges in achieving global competitiveness.
Japan's Prime Minister Shigeru Ishiba emphasized the need for "fairness" in currency discussions with the U.S. amid ongoing trade talks. He indicated potential flexibility on accusations of currency manipulation and suggested Japan might increase U.S. energy imports while addressing non-tariff barriers in the auto sector. Finance Minister Katsunobu Kato is set to meet with U.S. Treasury Secretary Scott Bessent to further these discussions.
Goldman Sachs and UBS forecast a continued rise in gold prices, driven by market turbulence from the US-China trade war and increased central bank purchases. Gold reached a record high of $3,245 an ounce, with Goldman predicting it could hit $3,700 by year-end, while UBS estimates a peak of $3,500. The dollar's depreciation is further fueling demand for gold as a safe investment.
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