USD/JPY is showing little movement on Thursday, as the pair trades just above the 111 line. On the release front, the BoJ maintained interest rates at -0.10%. Later in the day, consumer indicators will be in the spotlight, with the release of Household Spending and a host of inflation indicators, led by Tokyo Core CPI. In the US, key indicators all disappointed, as Core Durable Goods, Unemployment Claims, and Pending Home Sales missed their estimates. On Friday, the US will publish Advance GDP, which is expected to gain 1.3%. We’ll also get a look at UoM Consumer Sentiment.
The Bank of Japan held course and maintained interest rates at -0.10%. The negative rates are part of the BoJ’s ultra-loose monetary policy, which is expected to continue until inflation levels move closer to the central bank’s target of around 2 percent. The BoJ sounded optimistic about the economy, but acknowledged that monetary policy was unlikely to change in the near future. The BoJ is maintaining its asset-purchase program at 80 trillion yen annually, dampening hopes that the central bank might taper the purchases in response to an improving economy. Analysts noted that the BOJ’s quarterly outlook report said that the economy was moving towards "economic expansion", the first time the report has used the word "expansion" since 2008. The BoJ is clearly in no rush to change its monetary stance, and will likely hold course unless inflation levels move closer to the BoJ’s target of about 2%.
President Trump has repeatedly promised a major reform of the US tax code. Trump finally announced his long-awaited tax plan on Wednesday. The proposal calls for sharp reductions for both individuals and corporations. The plan calls for three tax brackets for individuals – 10%, 25% and 35%. The corporate sector would also see significant tax relief, with the corporate tax rate dropping from 35% to 15%, and the tax on multinationals’ overseas profits lowered from 35% to 10%. However, any tax reform proposals from the White House will require a stamp of approval from Congress, so Trump’s proposal should be viewed as a blueprint that is a long way off from becoming law. Trump’s proposal was short on details, although government officials are praising it as one of the largest tax cuts and broadest overhauls of the tax system in history. There hasn’t been much reaction from the currency markets, with the dollar showing limited movement against the Japanese yen and other major currencies in Thursday trading.
