The Japanese yen continues to trade bullish as the safe haven appeal of the currency stays strong over rising uncertainty in global financial markets. At the time of writing, USD/JPY is trading at around 105.80.

On Tuesday, there was a deeper yield curve inversion, caused by the widest gap seen since 2007 between the 10-year Treasury yields and the 2-year Treasury yields in the US. Amid rising trade tensions between the Us and China, this was seen as a sign that the US economy could soon slip into recession, causing the US dollar to trade under pressure and increasing the demand for safe haven currencies.

To make matters worse, the Chinee foreign ministry denied any contact between the trade teams of US and China following the latest round of tariff hikes. Trump had earlier stated on Monday that both teams were in touch and were looking to resume negotiations towards a trade deal again.

The bullish spike in the Japanese yen is also being closely monitored by Japanese authorities, as confirmed by the finance minister Taro Aso. High volatility in the markets driving up the value of the yen is weighing on Japan’s export-oriented economy, exerting further pressure on an already weak economy. Will Japanese policymakers step in to prevent the yen from appreciating further?