The Japanese yen continues to post losses this week. In North American trade, USD/JPY is trading at 111.21, up 0.20% on the day. On the release front, Japanese Core Machinery Orders declined 3.7%, a smaller decline than the estimate of -5.2%. Japanese PPI edged upwards to 2.8%, matching the estimate. In the U.S, inflation reports narrowly beat their estimates. Core PPI was unchanged at 0.3%, beating the forecast of 0.2%. PPI dropped from 0.5% to 0.3%, above the estimate of 0.2%.
The Bank of Japan remains cautiously optimistic about the domestic economy. On Tuesday, BoJ Governor Haruhiko Kuroda said that all nine regions of the country were showing positive growth. Kuroda said that “Japan’s economy is expected to continue expanding moderately”. The BoJ credited the positive economic outlook to strong demand for Japanese exports, a tight job market and solid consumer spending. Kuroda expressed confidence that inflation will reach the BoJ target of 2 percent, a signal that the BoJ has no intention of altering monetary policy.
Investors remain uneasy about the tariff battle being waged between the U.S and its major trading partners, particularly China. After the U.S and China imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps which will make it more difficult for U.S companies to do business in China. President Trump’s presence at the NATO summit will not bolster investor confidence, as Trump has lashed out at Germany and other NATO members for not paying their fair share in defense spending.
