The Japanese yen experienced notable fluctuations this week amidst developments in US-China trade relations and Bank of Japan (BOJ) monetary policy. On Monday, May 12, 2025, the USD/JPY exchange rate saw an increase of 1.9%, reaching 148.18. Earlier in the session, the yen had strengthened, hitting 148.59, its highest level since April 3, 2025.
The United States and China have reportedly agreed to a temporary reduction in tariffs on each other's products for 90 days. This agreement involves a significant tariff cut, leading to US tariffs on China being reduced to 30% and China's tariffs on the US dropping to 10%. This easing of trade tensions has increased risk appetite, boosting global stock markets.
However, Japan's economic indicators present a mixed picture. Household spending decelerated to 0.4% month-over-month in March, a sharp decrease from February's 3.5%. Average Cash Earnings also declined to 2.1% year-over-year, down from a revised 2.7% the previous month. The Bank of Japan (BOJ) decided to maintain its policy rate at 0.50% at its meeting ending on May 1, 2025. The BOJ's next meeting is scheduled for June 16–17, 2025.