Expectations for the easing of trade tariffs between the U.S. and China have increased, leading to reduced demand for safe-haven assets and directly contributing to the depreciation of the yen.

However, the yen's depreciation is also influenced by uncertainty surrounding the Bank of Japan's potential interest rate hikes in 2025, further widening the interest rate differential between the U.S. Federal Reserve and the Bank of Japan.

Tokyo’s Consumer Price Index (CPI) rose 3.5% year-over-year in April, up from 2.9% the previous month. In addition, Tokyo’s core CPI, which excludes volatile food prices, increased by 3.4%, marking a two-year high. This indicates an expansion in Japan’s inflation rate and provides the BoJ with more room to consider additional interest rate hikes.

Source: Fxstreet