USD/JPY has posted slight losses in the Thursday session. In North American trade, the pair is trading just above the 110 level. On the release front, Japanese Final GDP disappointed, as the reading of 0.3% missed the forecast of 0.6%. Japan’s current account surplus improved to JPY 1.81 trillion, well above the forecast of JPY 1.62 trillion. In the US, unemployment claims dipped to 245 thousand, higher than the estimate of 241 thousand.
It was report card day for the Japanese economy, but the results were disappointing. First quarter GDP was revised downwards to 0.3%, compared to 0.5% in the preliminary GDP report. At the same time, the economy has posted growth for five consecutive quarters – the first time that has occurred in over 10 years. Japan has benefited from a stronger global economy, notably the manufacturing and export sectors. However, domestic consumption remains sluggish, and household spending contracted 1.4% on year in April. The Bank of Japan will hold a policy meeting on June 15-16, and is expected to maintain its ultra-loose monetary stance in order to prop up inflation and domestic demand.
Japan’s economy continues to improve, and stronger numbers have buoyed the yen. Wage growth posted a solid gain of 0.5% in April, rebounding from a 0.3% decline in the previous release. The dollar has dropped below the 110 level for the first time since April 25. Stronger global demand has boosted the economy, notably the export and manufacturing sectors. The markets are predicting that Final GDP will be revised upwards to 0.6%, better than the 0.5% gain in Preliminary GDP. If Final GDP matches or beat its estimate, the yen rally could continue.
In Washington, the hottest ticket in town is the Senate Intelligence Committee hearing of former FBI director James Comey. On Wednesday, the committee released a written statement from Comey which discussed his meeting with President Trump. There are accusations that Trump asked Comey to close an investigation into Trump’s alleged ties with Moscow, and the committee will grill Comey on this key issue. The media is in a feeding frenzy ahead of Comey’s testimony, but it is doubtful that his testimony will be the "smoking gun" that leads to charges of obstruction of justice against President Trump. At the same time, Comey’s testimony could complicate matters for a beleaguered Trump administration, and any dramatic revelations could shake up the markets. Investors are growing more skeptical that Trump, who seems to be spending most of his time in damage control mode, will be able to deliver on key campaign planks, such as tax reform. If Trump appears even more vulnerable after Comey’s day on the stand, investors could flock to the safe-haven Japanese currency.
