These changes have dramatically increased the trade−weighted average tariff rate on all US imports. This modification has increased the tariff rate by an estimated 5.5 – 6.0 percentage points. This massive departure from Japan’s long-standing, and often protectionist, trade policy would have a tremendous and lasting effect on some of Japan’s most important industries.
The change to tariffs operates on a macro level, causing a repeated domino effect even in unrelated sectors. Now that the trade-weighted average tariff rate is more than four times higher, businesses and consumers will start incurring greater costs on imported goods. Japan, as noted by Foreign Policy, is left with some troubling implications. Major manufacturing and agricultural industries would be hurt by these increases in import prices and potential retaliatory measures.
They think this change might have a positive influence on the Japanese yen (JPY). Positive risk sentiment is likely to prevent the JPY from rallying too far. Smart investors are calculating the long-term effects of the new tariff landscape and other economic trends.
Look for an announcement first thing on Tuesday! Based on both these considerations, analysts do not believe that the RBA will touch the Official Cash Rate of 4.10%. This decision continues the pace they set with their February rate cut. This upcoming decision is a highly anticipated one, especially after recent economic indicators have triggered market participants to consider what the Fed’s next move will be.
A few weeks ago, Australia Retail Sales came out. They were enough to put little dents in AUD/USD currency pair. The Aussie remains above a four-week low reached on Monday. This stability is indicative of the sense of caution traders have undertaken in anticipation of what may develop from the RBA’s meeting.
USD/JPY slipped in Tuesday’s Asian trading session. This back movement accentuates the powerful effects of such hawkish expectations in regards to the Bank of Japan (BoJ). Consequently, these expectations keep strengthening the yen. Investors are watching these dynamics intently to see what they mean for the future path of currency and trade relations.