US tariffs on Japanese products, including cars, will decrease by September 16, as reported by Japan’s trade negotiator Akazawa. This news is consistent with earlier reports. The USD/JPY has dipped slightly, trading at around 147.30. Despite the tariff reduction, trade disputes between Japan and the US are still ongoing. While Washington has issued a presidential order on auto tariffs, there hasn’t been any action regarding the most-favored-nation status for pharmaceuticals and semiconductors, which remains the same.

Price Movements and Economic Fundamentals

The US tariff cuts on Japanese goods are mostly reflected in the market, which is why the USD/JPY’s drop to 147.30 seems temporary. The real focus will be on the economic fundamentals that will influence the market after this news is officially announced on September 16. We should be careful not to expect substantial yen strength from this announcement alone. The broader economic landscape indicates that the dollar may regain support soon. Recent data shows that US inflation for August 2025 was slightly higher than expected at 3.4%. Markets are now pricing in a 70% chance that the Federal Reserve will maintain steady interest rates through the end of the year. This stands in contrast to Japan, where the economy is showing signs of slowing. Japan’s recent economic indicators are not promising, with second-quarter GDP growth for 2025 at just 0.8% annually. This weak performance limits the Bank of Japan’s ability to raise interest rates, making the yen less appealing compared to the dollar. The divergence between the firm US policy and the more cautious Japanese approach is a significant long-term driver for the currency pair.

Derivative Trading Strategies

For those trading derivatives, this situation suggests preparing for a potential rebound in USD/JPY after the September 16 tariff update. Buying short-term call options on USD/JPY with strike prices around 148.50 or 149.00 could be a good strategy for capitalizing on a rise. This method helps define our risk while taking advantage of the widening interest rate gap. We should also keep in mind the market’s memory of late 2022, when the USD/JPY rose above 150, prompting intervention from Japanese authorities. While we’re not at that level yet, any quick move towards that point could prompt traders to be vigilant for official warnings. This past event serves as a psychological barrier for now. Unresolved trade issues regarding pharmaceuticals and semiconductors continue to pose risks. This suggests that implied volatility in USD/JPY may not decrease as much as expected after September 16. Instead of selling volatility, it might be smarter to seek opportunities where options overlook the risk of sudden policy changes from either Washington or Tokyo. Create your live VT Markets account and start trading now.

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