JPY Weakness Accelerates: What’s Fueling the Sell-Off?

As of July 9, 2025, the yen is under renewed pressure in the Tokyo market, with USD/JPY and major cross-yen pairs rising sharply. This trend reflects a mix of global trade risks, domestic political instability in Japan, and heightened attention to U.S. monetary policy.

🇺🇸 Return of the “Trump Tariffs”

The U.S. government has sent letters to several Asian countries, including Japan, notifying them of potential 25% tariffs on key exports like automobiles. While negotiations remain open until August 1, the potential impact on Japanese exporters has already been priced in as a bearish factor for the yen.

Key concerns:

• Heavy reliance on U.S. auto exports
• Risk of renewed U.S.-China trade tensions

🇯🇵 Political Uncertainty & Fiscal Worries Ahead of Japan's Upper House Election

With Japan’s upper house election approaching in late July, reports suggest the ruling coalition may lose its majority. The rise of conservative opposition parties and their proposed tax cuts and handout programs are raising market concerns.

Market reactions:

• Lack of clarity on funding → fears of increased JGB issuance
• Rising yields on ultra-long Japanese bonds → outflows from yen assets

💱 Yen Weakness Extends: USD/JPY Hits 147

The forex market has pushed USD/JPY to the 147 level, nearing the June 23 high of 148. EUR/JPY has climbed above 172, and GBP/JPY is approaching 200. A clear "yen-selling trend" is now in motion.

Key levels to watch:

• USD/JPY: Can it break above 148?
• Cross-yen pairs: Risk-on sentiment to continue?

🧩 Tonight’s Focus: FOMC Minutes & Central Banker Speeches

Key upcoming international events:

Economic indicators:

• U.S. MBA Mortgage Applications (June 28–July 4)
• U.S. May Wholesale Inventories (final)
• Mexico June CPI

Central bank speakers:

• ECB Chief Economist Philip Lane
• ECB Vice President Luis de Guindos
• Bundesbank President Joachim Nagel

Other events:

• U.S. 10-year bond auction ($38 billion)

🔍 Main Focus: FOMC Minutes and Inflation Outlook

Tonight’s release of the FOMC minutes (from the June 17–18 meeting) will be critical in gauging the Fed’s stance on inflation and rate cuts.

Key takeaways from the last meeting:

• Policy rate left unchanged (as expected)
• Two rate cuts still projected for 2025 (dovish bias)
• Powell emphasized tariff-driven inflation pressures → supportive of USD

This round of minutes will shed light on committee members' inflation expectations and the hawk-dove split.

✅ Conclusion: Will Yen Weakness Continue?

The current yen depreciation is driven by a combination of:

• Trade risks
• Political instability in Japan
• U.S. monetary policy

Going forward, the following will be crucial in determining the direction of yen pairs:

• Whether USD/JPY can break above 148
• The tone of the FOMC minutes
• Developments in Japan’s upper house election

Maintaining a three-pronged perspective—politics, economics, and monetary policy—will be essential for navigating the market ahead.