USD/JPY has posted slight gains on Wednesday. In the North American session, the pair is trading at 109.37, up 0.14% on the day. On the release front, Japan’s trade deficit narrowed to JPY -0.18 trillion, compared to JPY -0.49 trillion a month earlier. This beat the estimate and marked a 5-month low. The Bank of Japan concluded its policy meeting and maintained its monetary policy. There are no major U.S. indicators. On Thursday, the U.S. releases unemployment claims.
The global trade war remains a significant risk to Japan’s economy, and BoJ Governor Kuroda reiterated this on Wednesday, warning of the risks of increased protectionism and softer global demand. At its policy meeting, the bank maintained its huge stimulus program. The BoJ also lowered its inflation forecast, a strong signal that the bank has no intention of reducing stimulus or raising rates anytime soon. The slowdown in China is undoubtedly raising alarm bells at the BoJ, but Governor Kuroda put on a brave face, saying that he hoped the U.S-China trade conflict would be resolved soon, and expected the Japanese economy to continue to grow at a modest pace. However, If the U.S-China trade spat is not resolved soon, Japan could tip into recession. The export sector is hurting, as December exports fell to their lowest level in two years.
As for the yen, it posted gains of 3.4% in December, when risk appetite plunged and world stock markets fell sharply. The currency started January with gains, but these evaporated as risk appetite has improved. The lukewarm Japanese economy isn’t all that enticing for investors, but the safe-haven yen could once again become attractive if economic conditions worsen, such as a deterioration in the U.S-China trade war or softer data out of China.
With the global trade war showing no signs of easing, it is no surprise that growth forecasts for 2019 are heading south. On Tuesday, the International Monetary Fund lowered its global and eurozone growth forecasts. In October, the IMF projected global growth of 3.7% percent, but this has been revised to 3.5 percent. IMF head Christine Lagarde said that the world’s economy continues to expand, but “it is facing significantly higher risks”. There was better news for Japan, as the IMF raised its forecast for 2019 to 1.1%, up from 0.9% in October. The IMF forecast follows a soft Chinese GDP, which dropped to 6.6% in 2018, its weakest level since 1990.
Tuesday (January 22)
- 18:50 Japanese Trade Balance. Estimate -0.29T. Actual -0.18T
Wednesday (January 23)
- 9:59 BoJ Outlook Report
- 9:59 BoJ Monetary Policy Statement
- 9:59 BoJ Policy Rate. Estimate -0.10%. Actual -0.10%
- 23:30 Japanese All Industries Activity. Estimate -0.4%. Actual -0.3%
Thursday (January 24)
- 1:30 BoJ Press Conference
- 8:30 US Unemployment Claims. Estimate 212K
*All release times are EST
*Key events are in bold
USD/JPY for Wednesday, January 23, 2019
USD/JPY January 23 at 11:20 EST
Open: 109.37 High: 110.00 Low: 109.33 Close: 109.56
USD/JPY posted small gains in the Asian session and was mostly flat in the European session. The pair edged higher in the North American session but has retracted
- 109.37 was tested earlier in support. It remains a weak line
- 110.28 is the next resistance line
- Current range: 109.37 to 110.28
Further levels in both directions:
- Below: 109.37, 108.11, 106.88 and 105.66
- Above: 110.28, 110.95 and 111.83