Japan's Business Sentiment Mixed, Yen Strengthens

The Japanese yen has gained ground on Tuesday. In the North American session, USD/JPY is trading at 149.27, down 0.47% on the day.

The yen was red-hot in the fourth quarter of 2024, gaining a massive 9.5% against the US dollar, but has reversed directions in Q1, declining 4.7%.

Japan's Tankan Indices: Manufacturing Dips, Services Accelerate

The Manufacturing Tankan index indicated that confidence among manufacturers eased to 12 in Q1 2025, down from 14 in the previous quarter. This was the lowest level in a year, reflective of growing concern among Japanese manufacturers over US tariff policy.

The Non-manufacturing Tankan index, meanwhile, moved in the opposite direction, climbing to 35 in Q1, up from 33 in the Q4 2024 release. This was the fastest pace of growth since August 1991, as companies are increasingly passing on costs to consumers.

The mixed Tankan report is unlikely to change the cautious stance of the Bank of Japan, which has expressed concerns about the uncertainty caused by the threat of additional US tariffs. The BoJ held rates steady in March and the next meeting is on May 1, with the markets projecting another hold.

All eyes on Trump's Tariffs Threat

US President Donald Trump has threatened to impose wide-ranging tariffs on April 2, leaving US trading partners and the financial markets highly anxious ahead of what Trump has declared "Liberation Day".

It is unclear which countries will be targeted or what the tariff rates will be, which has only added to financial market jitters. If Trump goes ahead with the tariffs and targeted countries retaliate with counter-tariffs, we will be one step closer to a global trade war.

• USD/JPY has pushed below support at 149.65. Below, there is support at 149.02
• There is resistance at 150.59 and 151.22