USD/JPY has ticked higher in the Wednesday session. In North American trade, the pair is trading just below the 114 line. On the release front, the Bank of Japan published its summary of opinions. There are no major releases out of the US. On Thursday, PPI is expected to show a slight gain of 0.2%, and unemployment claims is forecast to climb to 245 thousand.
The BoJ released its summary of opinions from its April policy meeting. BoJ board members recommended that the central bank maintain its ultra-loose accommodative policy due to global downside risks. At the same time, the economy had improved, boosted by stronger exports and production. The summary stated that the BoJ should upgrade its economic assessment to state that the economy "has been turning towards a moderate expansion". On the inflation front, policymakers predicted that inflationary pressures would increase, but that the inflation target of 2 percent would not be attained before 2018. The summary reiterates the cautious optimism that characterized the BoJ rate statement in April – global demand has boosted the economy, but it’s too early too make any changes to the BoJ’s current quantitative easing program.
The yen continues to slide, and has lost 4.7% since April 17. The dollar pushed above the 114 line on Tuesday, as a soft Japanese wage growth report weighed on the yen. Wage growth declined 0.4% in March, marking the sharpest decline since June 2015. Prime Minister Abe’s government has urged businesses to raise worker’s wages, but the message has largely fallen on deaf ears, even with a tight labor market. A sluggish economy and weak consumer spending have dampened business confidence, so businesses are showing little appetite for raising wages and thus incurring more expenses.
Donald Trump’s unconventional style has caused consternation and uneasiness in the markets, but the political earthquake he has now stirred could become political quicksand for the new president. Trump abruptly fired FBI director James Comey on Tuesday, stunning lawmakers on both sides of the aisle. Comey, who has been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, clearly has been a thorn in Trump’s side. The White House has claimed that it fired Comey over his handling of an email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans have also voiced opposition as well. The firestorm could heat up further, with calls in Congress to appoint a special prosecutor into Trump’s connections with Russia. Has Trump gone one step to far? This latest controversy could cause some jitters among investors and send the greenback lower against the safe-haven Japanese yen.
