EUR/JPY falls below 155.50 following BoJ Deputy Governor Uchida's remarks
- EUR/JPY continues its losing streak as BoJ Deputy Governor Shinichi Uchida’s remarks reinforced expectations of further rate hikes.
- BoJ’s Uchida stated that Japan’s underlying inflation is steadily rising toward the 2% target, strengthening the case for policy tightening.
- US President Trump reignited trade tensions with Europe, suggesting that “reciprocal” tariffs could be imposed as early as April.
EUR/JPY remains under pressure for the fourth consecutive day, trading around 155.30 during Asian hours on Friday. The currency cross continues to struggle following hawkish remarks from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, who stated that Japan’s underlying inflation is gradually rising toward the 2% target. His comments reinforced market expectations that the BoJ will proceed with rate hikes this year, countering the impact of softer-than-expected Tokyo Consumer Price Index (CPI) data.
The latest Tokyo CPI report showed a slowdown in inflation. Headline Tokyo CPI rose 2.9% YoY in February, down from 3.4% in January. Core CPI (excluding fresh food and energy) increased by 2.2% YoY, below January’s 2.5%. Tokyo CPI ex Fresh Food rose 2.2% YoY, missing expectations of 2.3% and declining from 2.5% in the previous month.
In addition to BoJ-driven JPY strength, risk-off market sentiment is further supporting the Japanese Yen’s safe-haven appeal. Investor caution deepened after US President Donald Trump reaffirmed that his proposed 25% tariffs on Mexican and Canadian goods will take effect on March 4, alongside a 10% duty on Chinese imports, citing concerns over drug trafficking into the US.
President Trump also reignited trade tensions with Europe, hinting that “reciprocal” tariffs targeting the European Union (EU) could come as early as April. In a press conference on Wednesday, he announced that 25% tariffs on “cars and other things” from the Eurozone would be imposed “very soon.” A European Commission (EC) spokesperson responded, stating, “The EU will react firmly and immediately against unjustified barriers to free and fair trade.”
A potential US-EU tariff war would pose significant risks to the already fragile Eurozone economy, which is struggling with weak demand. The growing uncertainty could weigh on the Euro (EUR), further pressuring the EUR/JPY cross.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Recommended Articles
