The Japanese yen has posted modest gains in the Thursday session. In the North American session, USD/JPY is trading at 109.99, down 0.17% on the day. On the release front, Japanese Leading Indicators improved to 105.6%, matching the forecast. In the U.S, unemployment claims ticked up to 222 thousand, just below the estimate of 223 thousand. Later in the day Japan releases Final GDP and Current Account. The markets are braced for Final GDP to decline 0.1 percent. This would mark the first decline in over two years and if GDP does point to contraction, traders should expect the yen to lose ground. Japan’s current account surplus is expected to widen to JPY 2.10 trillion. On Friday, Japan publishes Economy Watchers Sentiment and the G7 leaders will meet in Quebec.
Japan finds itself in the enviable position of being on the sidelines in a simmering trade dispute, after the US slapped tariffs on steel imports from between the European Union, Canada and other countries. However, Japan has plenty to lose if the tit-for-tat tariff battle escalates, which could snowball into a full-blown global trade war. Last week, finance ministers from six members of the G-7 were united in their criticism of US Treasury Secretary Steve Mnuchin over the brewing trade war. The leaders of the G-7 are meeting on Friday in Quebec, and President Trump is likely to receive an earful about the tariffs from the six other members. The escalating trade battle is sure to dominate the summit, and if the leaders fail to resolve matters, it could spell bad news for the export-reliant Japanese economy, which has greatly benefited from a stronger global economy.
Japanese officials are keeping a close eye on the upcoming summit between US President Trump and North Korean President Kim Jong-un next week in Singapore. The meeting will mark the first ever face-to-face meeting between leaders of the U.S and North Korea. Trump has tried to lower expectations, saying the sides are unlikely to reach an agreement on North Korea relinquishing its nuclear weapons. Still, the fact that the two leaders are meeting is a sign that significant progress is being made in the long-standing dispute in the Korean peninsula. North Korean missiles represent a significant threat to Japan’s security, and Japanese Prime Minister Abe is expected to press Japan’s concerns when he meets with Trump ahead of the summit.
