The Japanese yen has inched higher in the Wednesday session. In the North American trade, USD/JPY is trading at 110.17, up 0.10% on the day. On the release front, Japan released the minutes of the April policy meeting. At the ECB Forum in Sintra, the heads of the Federal Reserve and Bank of Japan will participate in a panel. In economic news, the U.S current account deficit narrowed to $124 billion, beating the forecast of $129 billion. On the housing front, Existing Home Sales dropped to a 3-month low. The reading of 5.43 million was well shy of the estimate of 5.52 million.
There were no surprises from the minutes of the Bank of Japan’s April policy meeting. At the meeting, policymakers maintained interest rates at -0.10%. As well, the bank also dropped the timeframe for achieving its inflation target of 2 percent, a signal that the bank has no plans to increase stimulus. The minutes indicated that most members wanted to maintain current monetary policy, holding rates at -0.10% and the 10-year bond yield around zero percent. BoJ policymakers appear resigned to the fact that the inflation target will not be reached anytime soon, but the BoJ nevertheless is sticking to its 2 percent target.
Investor risk appetite has waned this week, as the nasty trade war rhetoric between the United States and Japan continues to worsen. There are growing fears of a global trade war, which would take a toll on the global economy and could trigger a worldwide recession. On Tuesday, President Trump raised the stakes and threatened to impose a 10 percent tariff on some $200 billion in Chinese goods. Trump has vowed to take action on the $375 billion trade deficit that the U.S has with China, claiming that the latter is guilty of unfair trade practices. The Japanese economy relies heavily on exports, and a rash of tariffs would likely hamper the country’s economy. Although the yen is a safe-haven currency, the latest tariff tussle has seen investors flock to the U.S dollar rather than the Japanese yen.
