The Japanese yen has ticked lower in the Tuesday session. In North American trade, USD/JPY is trading at 112.55, up 0.07% on the day. On the release front, market forecasts were on the button with U.S. construction numbers. Building Permits improved to 1.26 million and Housing Permits climbed to 1.23 million, as both indicators matched the forecasts. Later in the day, Japanese All Industries Activity is expected to post a sharp decline of 0.8 percent.
The ongoing trade dispute between the U.S. and China shows no signs of being resolved anytime soon, and the crisis is expected to have a negative impact on the economies of both countries. This does not bode well for the Japanese economy, which is heavily reliant on exports to both countries. An Asia-Pacific Economic Cooperation summit in Papua New Guinea ended in discord on Sunday, with leaders unable to agree on a final communique. U.S Vice President Mike Pence, who headed the U.S. delegation, was blunt in his remarks, saying that China would have to drastically change its trade practices before the U.S. would remove current tariffs on $250 billion in Chinese goods.
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.
