Yen Weakens as BoJ Holds Rates Steady in Light of Tariff Concerns
Markets analysis on behalf of Konstantinos Chrysikos Head of Customer Relationship Management at Kudotrade
The Japanese yen weakened while Japan’s 10-year government bond yield declined after the Bank of Japan (BoJ) maintained interest rates at 0.5% and lowered its growth projections due to increasing uncertainty around U.S. tariffs. The BoJ expressed concerns that higher tariffs could slow global trade, dampen business confidence, and create market volatility. Despite these risks, the BoJ reaffirmed its 2% inflation target.
The BoJ revised its economic growth forecast, projecting Japan’s GDP to expand by 0.5% for fiscal 2025 and 0.7% for fiscal 2026, down from previous expectations. This reflects the impact of global trade tensions, particularly U.S. tariffs. While the BoJ acknowledged risks, the central bank suggested that Japan’s economy could accelerate once global conditions stabilize.
The market is now anticipating Friday’s Japan March job data. Stronger-than-expected employment figures could support the yen, reflecting a resilient labour market. If the unemployment rate remains low at 2.4% or job availability increases, it could provide confidence in economic growth. Conversely, weaker job data, such as a rise in unemployment or a drop in the jobs-to-applications ratio (1.24 in February), could weigh further on the yen.
