The Japanese yen has posted slight losses in the Monday session. In North American trade, USD/JPY is trading at 112.48, down 0.32% on the day. On the release front, Japan’s trade surplus rose to JPY 0.30 trillion, lower than the estimate of JPY 0.48 trillion. There are no major U.S. events on the schedule. On Tuesday, the U.S. releases building permits and housing starts.
The Bank of Japan has no plans to alter its ultra-accommodative monetary policy, as inflation remains well below the BoJ target of around 2 percent. However, there have been negative side effects to this stance, primarily the toll on bank profits, which has raised concerns that banks might take excessive risks in order to recoup lost profits. BoJ Governor Haruhiko Kuroda addressed this issue on Monday, warning that risk management steps were needed in order to maintain the stability of the financial system and ensure that borrowing costs did not climb sharply.
In the U.S., consumer inflation and spending numbers were strong in October. On Thursday, the U.S released retail sales reports. Retail sales rebounded with a strong gain of 0.7% in October, after a decline of -0.1% a month earlier. Core retail sales jumped 0.8%, after a gain of 0.1% in September. There was good news from the inflation front on Wednesday, as U.S consumer inflation numbers beat their estimates for October. The consumer price index posted a gain of 0.3%, its strongest gain since January. Core CPI, which excludes food and energy prices edged higher to 0.2%, marking a 3-month high. Both releases were in line with forecasts. Core CPI was 2.1% higher than a year ago. The solid consumer data means that the Fed remains on track to continue raising interest rates. The Federal Reserve holds its next policy meeting in December, with the odds of a December rate hike at 69%, slightly lower compared to last week.
