The Japanese yen has ticked higher in the Monday session. In North American trade, USD/JPY is trading at 113.46, up 0.45% on the day. On the release front, Japanese Flash Manufacturing PMI dipped to 51.8, shy of the estimate of 53.0. This marked a 4-month low. Later in the day, Japan releases the Services Producer Price Index. There are no U.S indicators on the schedule. On Tuesday, Japan releases BoJ Core CPI, the preferred inflation indicator of the Bank of Japan. The U.S will publish CB Consumer Confidence, which is forecast to dip to 136.2 points.
Japanese inflation data will be in the spotlight on Monday and Tuesday. Last week, National Core CPI, which excludes volatile food prices, came in at 1.0% on an annualized basis, for a second straight month. The BoJ’s target of around 2 percent remains elusive and inflation could face further headwinds, as the slowdown in China and the ongoing global trade war takes a bite out of the country’s export sector. As well, lower oil prices could also hamper inflation. There is little reason to expect that inflation will gather any upward momentum and some analysts are forecasting that inflation in 2018 will fall below the 1 percent level.
The markets have grown accustomed to strong economic numbers from the U.S, but quarterly GDP readings have been falling throughout 2018. This has led to speculation that the Federal Reserve could ease up on its interest rate hikes next year. Only a few weeks ago, there were expectations that the Fed might raise rates each quarter in 2019, but the mood has become more cautious. The U.S.-China trade war has caused a slowdown both economies, and President Trump’s $1.5 trillion tax cut has boosted the economy, but its effect on the economy is fading. A slowdown in the U.S economy would further exacerbate difficult conditions for the global economy, which is already feeling the effects of the global trade war.
