US and Japan reach trade deal, Ishiba set to resign, yen steady

[Redator]

The Japanese yen has run out of steam after a two-day mini rally, in which it gained 1% against the US dollar. In the European session, USD/JPY is trading at 146.65, up 0.05% on the day.

Ishiba set to resign

Major developments continue to come out of Japan on a daily basis. Prime Minister Ishiba is apparently set to resign his post in August, only a day after declaring he would remain in office. Ishiba had said that he would complete the trade deal with the US before stepping down and with the deal just signed, Ishiba can hand over the reins.

Ishiba's coalition failed to secure a majority in the upper house of parliament in the Sunday election. The government is not in danger of falling but will have to work with the opposition in order to pass legislation.

US-Japan reach trade deal

There was a breakthrough in the tariff saga as the US and Japan announced that they have reached a trade deal. The agreement subjects Japanese goods, including automobiles, to a 15% tariff. Japan has also agreed to invest $550 billion in the US and increase purchases of US rice.

The Bank of Japan reacted positively to the trade agreement announcement. Deputy Governor Shinichi Uchida called the deal a "big major breakthrough" and said that uncertainty from the tariffs had eased, which would make it easier for the BoJ to increase interest rates.

The BoJ is expected to raise rates before the end of the year but the money markets don't expect a hike at the July 31 meeting. The decision is unlikely to be a surprise but investors will comb through the updated quarterly economic forecast. The Bank has maintained rates for four consecutive meetings after hiking rates to 0.50% in January.

USD/JPY Technical

• USD/JPY has pushed above resistance at 146.87 and 147.13. Above, there is resistance at 147.48
• 146.52 and 146.26 are the next support levels

USDJPY 4-Hour Chart, July 23, 2025

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