COMMENT-Uncertainty is the friend of the yen

Yen bulls are likely to maintain their long positions as long as investor unease remains high over trade tariffs and other sources of uncertainty roiling markets.

The Japanese currency's haven appeal was bolstered on Tuesday by the increasing likelihood of Fed rate cuts, U.S. President Donald Trump's views on Asian currency devaluation, and market volatility as asset prices adjust to new U.S. tariffs.

The prospect of a slowing U.S. economy has moved the probability of a 25 basis points Fed rate reduction in May to above 50%. One-month USD/JPY implied volatility, a period that includes the possible introduction of reciprocal tariffs on April 2, has reached its highest level since early December.

Though USD/JPY bears remain in control, the pace of yen gains may be gradual. Bank of Japan policy expectations are driving the currency upwards more than short-covering of yen carry positions. Therefore, remarks by BOJ Governor Kazuo Ueda and Finance Minister Katsunobu Kato at an IMF panel on Wednesday will be closely watched to see if the bank's tightening bias has changed.

Ahead of those comments, Trump is expected to outline his agenda in an evening speech before Congress.

As long as U.S. growth worries are undermining the greenback, USD/JPY shorts built between 152 and 155 are likely to hold on to positions. Technically, a drop below 148 and the 147.20 September 3 high would target 145, a level where March options expiries have accumulated.