The Japanese yen has inched lower in the Monday session. In the North American trade, USD/JPY is trading at 110.45, down 0.19% on the day. On the release front, Japan surprised the markets by posting a trade deficit, the first in three months. The reading of -0.30 trillion yen was well off the forecast of a surplus of 0.14 trillion yen. There are no major U.S indicators on the schedule. On Tuesday, the focus is on construction numbers, as the U.S releases building permits and housing starts. Japan will release the minutes of the May policy meeting.
Investor risk appetite has waned after U.S President Trump imposed further tariffs on some $50 billion of Chinese products. China has promised to retaliate against U.S imports, as trade ties between the world’s two largest economies continue to deteriorate. With the U.S recently slapping tariffs on the E.U and the NAFTA talks in pause mode, it is no wonder that investor anxiety has risen. If the trade war between the U.S and its partners continues to escalate, the Japanese economy, which relies heavily on exports, could weaken and drag down the Japanese yen.
There were no surprises at Thursday’s 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. The Bank of Japan has stubbornly held onto its inflation target, even though there is little chance that the target will be met anytime soon. The recent improvement in the economy has stirred some debate about tapering stimulus, but the cautious BoJ is unlikely to make any such moves in 2018.