We are one week out from Japan’s financial year-end. An often-asked question is whether there is any seasonality in USD/JPY running into FY-end. The theory goes that Japanese companies may repatriate foreign earnings to dress up their balance sheets for the FY.
Since 2000, the average change in USD/JPY in the last week of the FY is +0.1%. The median return is +0.3%. USD/JPY has rallied 58% of the time. So, there is no significant seasonality in USD/JPY running into FY-end, at least not in the direction that the usual theory suggests.
Instead, in the coming week USD/JPY will be driven by news about US President Donald Trump’s reciprocal tariffs in the run up to their implementation on 2 April as well as US core PCE and consumer confidence data. The strongest driver of USD/JPY, according to our models, remains the US short-term rates differential. The second strongest is the demand for carry trades represented in our models by global equities.
In terms of the latter, newswire reports over the weekend that Trump’s reciprocal tariffs could be more targeted than investors originally envisaged, have given global equities and USD/JPY a lift. US President Donald Economic Council director, Kevin Hassett, said markets are overestimating the scope of the tariffs. US Treasury Secretary, Scott Bessent, has suggested it is roughly 15% of countries that are the worst offenders in terms of their unequal trade with the US, and they will be the targets of the tariffs. There has therefore been speculation some countries will be excluded from tariffs.
As with all of Trump’s policies, however, the situation is fluid and it is not known what form they will take until the President himself announces the actual policy. So, investors will remain nervous in the run up to 2 April. In the meantime, the boost to sentiment is helping USD/JPY grind higher. USD/JPY continues to try and break important technical resistance at 150. A break of this level would end the exchange rate’s YTD downtrend.
