USDJPY: BoJ Report Shows Growing Anxiety (8th April)

• Yen Performance: Stable but with increased volatility expectations due to trade uncertainty
• Market Reactions: Wait-and-see behavior in equities tied to export-oriented sectors (e.g., machinery, autos)

Fundamental Factors Affecting the Japanese Yen and Economy

1. U.S. Tariff Uncertainty Weighs on Sentiment
   • While BOJ's April Regional Economic Report showed no change in regional growth, concern over U.S. trade policy is rising rapidly.
   • Companies in manufacturing hubs (e.g., Tokai region) are delaying capital investment and reporting declines in overseas demand.
   • BOJ branch managers report growing anxiety over reciprocal tariffs affecting production and exports.
2. Corporate Outlook Weakening
   • Machinery and electrical equipment manufacturers report that foreign buyers are stalling orders, anticipating further escalation.
   • A "wait-and-see" approach is emerging among businesses, which could delay recovery in investment and output.
3. Domestic Consumption Still Resilient
   • Strong luxury goods and services sales, particularly among foreign visitors and wealthy Japanese consumers, help support overall economic activity.
   • Events and tourism-related demand provide a bright spot in an otherwise cautious macro backdrop.
4. No Immediate Change in BOJ's Regional Outlook
   • Data used in the report was compiled before Trump's 2nd April reciprocal tariffs, meaning future reports may reflect more severe downside revisions.
   • BOJ officials emphasize the need to closely monitor the trade situation, especially in regions heavily dependent on exports.

Key Takeaway for Traders

• Yen Outlook: Rising global trade tensions may prompt risk-off flows into the yen, supporting strength in the short term.
• Equities/Exporters: Export-heavy sectors in Japan may see increased headwinds, especially if reciprocal tariffs escalate further.
• Monetary Policy Implications: BOJ will likely remain cautious and delay further tightening, particularly if capital investment and production falter.
• Watchlist: Look for signs of a deeper slowdown in future BOJ regional reports, updates on U.S. tariffs, and Japanese manufacturing/export data.

USDJPY – H4 Timeframe

The 4-hour timeframe chart of USDJPY shows a likely SBR pattern formation. We have already seen a sweep below the previous low, followed by the bullish break of structure, all of which are components of the SBR pattern. The demand zone at the base of the recent impulse presents a viable point of interest for a bullish entry.

USDJPY – H3 Timeframe

The 3-hour timeframe setup is very similar to that of the 4-hour timeframe chart; however, the 3-hour timeframe chart presents clarity as to the presence of an FVG and inducement just before the highlighted demand zone. These are confluences based on the Smart Money Concepts approach to trading.

Analyst's Expectations:

Direction: Bullish

Target- 149.690

Invalidation- 144.362

CONCLUSION

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