USD/JPY Outlook: Relief bounce in US dollar before yen strength resumes

• The multi-week decline of the USD/JPY from the 28 March high of 151.21 has stalled today, supported by US President Trump’s “big progress” in US-Japan trade talks.
• The US/Japan implied interest rate policy curve trajectory continues to narrow, which supports further yen strength.
• Watch the 147.30 key medium-term resistance on the USD/JPY.

This is a follow-up analysis of our prior report, “USD/JPY Outlook: The US dollar bounce against the yen may face headwinds soon,” dated 18 March 2025.

Since our last publication, the USD/JPY has staged the expected corrective rebound of 1.3% to print an intraday high of 151.21 on 28 March, just a whisker below the 151.50 medium-term pivotal resistance highlighted in our analysis.

Thereafter, it staged a multi-week bearish impulsive down move of 6.3% to print a 7-month low of 141.64 on Wednesday, 16 April, reinforced by the uncertainties on the implementation of different types of US trade tariffs, and heightened tensions between the US and China that sparked an increased risk of a global economic growth slow down, in turn, benefiting safe haven currencies such as the Japanese yen and Swiss franc.

The recent Japanese yen strength has taken a backseat since the start of today’s 17 April Asian session, where the USD/JPY rebounded by 0.6% to print an intraday high of 143,08 at the time of writing.

The US dollar’s bounce has been supported by US President Trump’s positive rhetoric after the conclusion of the first session of the US-Japan trade negotiations dialogue yesterday, 16 April. He touted that “big progress” has been made via his social media account.

In contrast, the key Japanese official participating in the trade talks, Ryosei Akazawa, the Economic Revitalisation Minister was not so optimistic as he mentioned Japan will schedule the next consultation with the US to be held within this month, which suggests that there are still hurdles and frictions after yesterday's first round of trade negotiation.

The implied interest rate differential between US and Japan policy interest rates, projected to December 2025 via short-term rate futures, has narrowed to 2.86% from 3.20% three months ago.

This continued compression in the yield spread could exert further downward pressure on USD/JPY, in line with historical correlations (see Fig 1).

Japan’s March inflation data will be released on Friday, 18 April, with core and core-core inflation expected to edge up to 3.2% y/y (from 3.0%) and 2.7% y/y (from 2.6%), respectively. A stronger-than-expected reading would support the Bank of Japan’s gradual tightening stance and could further narrow the US-Japan implied interest rate differential.

The spread of the daily MACD trend indicator and its signal line has continued to widen towards the downside (below the zero centreline), which supports the ongoing medium-term downtrend phase of the USD/JPY.

Watch the 147.30 key medium-term pivotal resistance, and a break below 140.30/140.00 intermediate support zone may trigger the continuation of the impulsive down move sequence to expose the next medium-term supports at 137.10/136.50 and 134.20/133.75 next.

However, a clearance above 147.30 invalidates the bearish tone for a corrective rebound towards the next medium-term resistances at 151.40 and 154.15.