Yen Alone Weakens Among G10 Currencies Due to Trump's Tariffs

【Tokyo=Kim Kyung-min Correspondent】 In the foreign exchange market, the yen is showing a lone weakness against major currencies. It has fallen to a record low against the Swiss Franc and has also dropped to the lowest level against the Euro in a year. The perception that the US-Japan tariff negotiations are facing difficulties is spreading, increasing concerns about economic slowdown and weakening expectations for early rate hikes by the Bank of Japan.
According to the foreign exchange market on the 14th, the yen-dollar exchange rate rose to the 147 yen level per dollar on the 11th, reaching the yen's lowest level in about two weeks. The decline rate over the week alone reached 2%.
The yen's weakness is not limited to the dollar and is spreading across the board. Against the Swiss Franc, it hit a record low of 1 Franc = 185 yen, and against the Euro, it recorded 1 Euro = 172 yen, falling to the lowest level in about a year. Against the Pound, it approached the annual low at the high 199 yen level, with the 200 yen mark in sight.
Donald Trump, the President of the United States, announced in a letter on the 7th that "a 25% tariff will be applied to all products imported from Japan." This is 1 percentage point higher than the 24% announced last April. This measure is the first high-rate tariff notification targeting 14 countries, including South Korea, Malaysia, and Kazakhstan, with Japan being the only G10 country included.
Concerns about economic downturn due to tariff shocks are also growing. Nomura Research Institute estimates that if the US applies the new tariff rate, the world's real Gross Domestic Product (GDP) will decrease by 0.62%, and Japan could experience a maximum negative growth of 1%. This analysis suggests it could be a fatal blow to Japan's export-dependent economy.
Additionally, the lack of room for interest rate policy is also acting as a negative factor. The perception that the Bank of Japan is unlikely to shift to tightening amid the possibility of economic slowdown is spreading, further strengthening the yen's selling pressure aimed at widening interest rate differentials.
Some in the market are also expressing concerns that "Japan is transitioning into a structurally weak currency due to tariff pressure and shaking economic fundamentals." According to the US Commodity Futures Trading Commission (CFTC), speculative forces' net long positions on the yen against the dollar have decreased by nearly 35% compared to the end of April.
The future direction of the foreign exchange market is expected to be determined by the US June Consumer Price Index (CPI) scheduled for the 15th and the results of the Japanese House of Councillors (Upper House) election on the 20th. If the CPI significantly exceeds market expectations, the Federal Reserve's (FRB) interest rate cut expectations may be dashed, intensifying the dollar's strength and the yen's weakness. Conversely, if inflation slows, expectations for the end of US tightening may revive, potentially reversing market trends.
Political events are also a variable. Ahead of the Upper House election, if the Ishiba Cabinet's approval rating remains stagnant and the opposition party advocating for consumption tax cuts expands its seats, concerns about fiscal expansion may emerge, continuing the yen's weakening trend.

km@fnnews.com Kim Kyung-min Reporter