The Japanese yen has inched lower in the Friday session. In the North American trade, USD/JPY is trading at 110.73, up 0.09% on the day. On the release front, the Bank of Japan held the course on monetary policy. In the U.S, the Empire State Manufacturing Index is forecast to drop to 19.1 points. We’ll also get a look at UoM Consumer Confidence, which is forecast to soften to 98.5 points.

There were no surprises from the Bank of Japan policy meeting. Policymakers maintained interest rates at -0.10%. The bank also downgraded its inflation forecast to a range of between 0.5% and 1.0%, underscoring that the massive stimulus program has failed to raise inflation anywhere near the bank’s target of around 2 percent. Japanese officials are nervously watching as the Trump administration slapped further tariffs on $50 billion of Chinese products. Although Japan appears to be in Trump’s good graces for now, an escalation in tariffs could trigger a global trade war, which would be disastrous for Japan’s export-reliant economy.

As widely expected, the Federal Reserve raised interest rates by a quarter-point, to a range between 1.75 percent and 2.00 percent. Fed Chair Jerome Powell sounded hawkish in his press conference, saying that the economy was performing well and that “overall outlook for growth remains favorable”. This message echoed the rate statement, in which policymakers said that “economic activity has been rising at a solid rate”, pointing to stronger consumer spending and business investment. What was may have been the most notable development was that the Fed rate projections were revised upwards, predicting two additional rate hikes in 2018, for a total of four hikes. Until now, the Fed had projected three rate hikes this year. This represents a nod to the strength of the U.S economy and could boost the dollar against its rivals.

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