Tokyo and Washington prepare for crucial trade talks – Rabobank

The world will be watching the Japan/US trade talks that are due to start in Washington on Thursday. Japan is the first major country to have talks with the Trump administration since the Rose Garden tariff address on April 2, Rabobank's FX analyst Jane Foley notes.

Scope for pullbacks in USD/JPY in the weeks ahead

"While Trump last week delayed his reciprocal tariffs for most countries over and above the 10% base level for ninety days, PM Ishiba has told the Japanese parliament that he is 'not of the view that we should make big concessions for the sake of wrapping up negotiations quickly'. Press reports indicate that Japan will not use its large holdings of US treasuries as a negotiation tactic."

"That said, Japan does have a relatively strong hand going into the talks. It may also make it clear that it has no issue with the JPY strengthening moderately. We started the year with the view that the JPY had a good chance of being the best performing G10 currency in 2025. It is currently in fourth position after the SEK, CHF and the EUR."

"However, while there is scope for pullbacks in USD/JPY in the weeks ahead in favour of the USD, we remain optimistic about the ability of the JPY to regain pole position within the G10 universe this year. USD/JPY has sailed through our year-end target of 145 and we will be looking to revise this forecast in the coming weeks."