The Japanese yen has posted slight losses in the Monday session. In the North American session, USD/JPY is trading at 109.90, up 0.32% on the day. On the release front, Japanese Core Machinery Orders impressed with a gain of 10.1%, crushing the estimate of 2.5%. Preliminary Machine Tool Orders was down sharply, with a gain of 14.9%. Later in the day, we’ll get a look at BSI Manufacturing Index and PPI. There are no major indicators in the U.S. On Tuesday, the US releases CPI reports.
The markets were braced for a bumpy meeting between the Group of Seven leaders on Friday, but the sharp disagreements between President Trump and the other six members were far worse than expected. Trump openly clashed with the other leaders over his recent tariffs against the European Union and Canada and pulled back his endorsement of the traditional post-summit statement put out by the other members. The undiplomatic Trump also tweeted that Canadian Prime Minister Trudeau, who hosted the summit, was “dishonest and weak”. Canada and the EU are furious over recent US tariffs, especially because of Trump pushed them through on the basis of ‘national security’. The glaring cracks in G-7 unity could cast a long shadow on trade relations between the U.S and the “G-6”, with business confidence and capital spending at risk if the tariff spat continues. Trump has not slapped tariffs on Japan, but the export-based Japanese economy has plenty to lose if the tit-for-tat tariff battle escalates, which could snowball into a full-blown global trade war.
Japanese officials are keeping a close eye on the historic summit between US President Trump and North Korean President Kim Jong-un in Singapore in Tuesday. The meeting will mark the first ever face-to-face meeting between leaders of the U.S and North Korea. It remains unclear if the two leaders will sign any agreements, or will the sides treat the summit as a “getting to know you” opportunity. North Korean missiles represent a significant threat to Japan’s security, and Japan will want to see significant de-nuclearization steps by North Korea before the U.S removes any troops from South Korea.
