USD/JPY tumbles to near 149.00 as Trump tariff fears improve Yen's safe-haven appeal

• USD/JPY slides to near 149.00 as the Japanese Yen strengthens due to multiple tailwinds.
• Investors expect Trump's tariffs could weigh on the US economic outlook.
• The BoJ is expected to raise interest rates in the May policy meeting.

The USD/JPY pair falls sharply to near 149.00 during North American trading hours on Tuesday. The pair faces intense selling pressure as the Japanese Yen (JPY) outperforms, given its safe-haven status while investors bracing for the release of a detailed reciprocal tariff plan by United States (US) President Donald Trump on Wednesday.

Though the US Dollar (USD) also carries a safe-haven status, it struggles to attract bids as investors expect Trump tariffs will prompt economic risks in the US economy. It will be US importers who will bear the burden of higher tariffs and will pass on to consumers. Such a scenario will significantly diminish the purchasing power of households.

According to the Washington Post, the White House aides have drafted a proposal to impose 20% tariffs on most imports to the US.

The strength in the Japanese Yen (JPY) is also driven by growing expectations that the Bank of Japan (BoJ) will raise interest rates in the May policy meeting. With inflation remaining above 2% due to strong consumption and wage growth, the BoJ could deliver a 25 basis-point hike in May," analysts at ING said.

Meanwhile, weak US ISM Manufacturing Purchasing Managers Index (PMI) for March, and soft JOLTS Job Openings data for February has also exerted some pressure on the US Dollar. The ISM Manufacturing PMI came in lower at 49.0 against estimates of 49.5 and February's reading of 50.3. A figure below 50.0 suggests that the manufacturing sector activity contracted.

US employers posted 7.57 million jobs in February, slightly lower than the expectations of 7.63 million and the prior release of 7.76 million.