Japan Manufacturing PMI in Focus Amid Tariff Concerns
On Monday, March 3, Japan’s manufacturing sector data could impact USD/JPY trends amid growing concerns over sweeping US tariffs.
According to the flash survey, the Jibun Bank Manufacturing PMI edged up to 48.9 in February from 48.7 in January, though it remained in contraction territory. An upward revision beyond the 50 neutral point would signal improving demand, strengthening the Japanese Yen. However, the flash survey showed new export orders falling at a stronger pace, while output prices rose more slowly compared with January.
Stronger domestic demand could help offset weaker overseas demand. This may ease concerns about the economic impact of US tariffs and support a more hawkish BoJ rate path. Conversely, a downward revision, driven by weaker overseas and domestic demand alongside softer price pressures, could temper BoJ rate hike bets.
Shifting to the US session, economists expect the ISM Manufacturing PMI to slip from 50.9 in January to 50.8 in February. A higher reading, boosted by rising new orders, higher employment, and price increases, could temper bets on multiple Fed rate cuts. Under this scenario, the USD/JPY may move toward the 152 level and the 200-day Exponential Moving Average (EMA).
Conversely, a PMI drop below the 50 neutral level could fuel recession fears, signaling a more dovish Fed rate path. This could send the USD/JPY pair toward the February low of 148.557.
Beyond the data, investors should closely monitor US tariff policies and FOMC members’ views on inflation, labor markets, and the Fed’s policy trajectory.
