EBC Markets Briefing | ​Yen meanders with recession looming

The yen steadied on Wednesday with the dollar hunkering near its over 3-uear low. The BOJ is now more concerned about a mixed inflation picture which points to weak consumer demand.

Underlying inflation in Japan, which focuses on the strength of domestic demand and wages rather than volatile food and fuel, has been tracking below the 2% target, in contrast with headline readings.

Confidence among large Japanese manufacturers improved in the three months to June, a central bank survey showed, as firms maintained their bullish long-term spending plans despite US tariffs.

Big companies expect to increase capital expenditure by 11.5% in the current fiscal year ending in March 2026, up from a 3.1% gain projected in March and above a market forecast for a 10% rise.

Japan's chief trade negotiator Ryosei Akazawa said the 25% tariffs on cars is unacceptable, adding that local carmakers produce far more cars in the US than they export to the country.

Japan's trade surplus with the US last year stood at $59.4 billion, the fifth largest on record, roughly 82% of which was from cars and car parts. The economy is risking a technical recession due to tariff hits.

The yen has been moved sideways around 50 SMA, and the path of least resistance is prolonged consolidation. In this case, the currency would retest 144.40 per dollar.

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