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The Japanese yen experienced a near-term pullback as traders reacted to the latest economic data on trade.
March export data showed a sixth consecutive month of growth, but the pace slowed from February and undershot market expectations.
Heightened trade tensions, particularly the threat of sweeping U.S. tariffs on Japanese goods, continue to weigh on sentiment.
While exports to the U.S. rose modestly, gains were concentrated in specific sectors such as electronics and pharmaceuticals, and shipments to China declined.
This uneven export performance, coupled with growing uncertainty over U.S. trade policy, contributed to short-term currency weakness. Additionally, the Bank of Japan (BoJ) flagged potential risks stemming from U.S. trade measures, including impacts on domestic wages and consumption.
Despite these risks, Japan’s trade surplus in March could support the yen. Moreover, the yen remains underpinned by its safe-haven status while investors continue to move away from the US dollar. Looking ahead, inflation data, due on Friday, will be closely monitored. The latest figures for February indicate a deceleration in headline and core inflation. If inflation returns to the upside, the Bank of Japan could move to a more restrictive stance, further supporting the yen.
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