USD/JPY has recorded considerable losses in the Wednesday session, after a quiet start to the week. In North American trade, the pair is trading at 111.60. On the release front, Japanese Revised Industrial Production posted a decline of 1.9%, just above the estimate of a 2.1% decline. Later in the day, Japan releases Preliminary GDP for the first quarter, with an estimate of 0.4%. There are no major US releases on the schedule. On Thursday, the US releases unemployment claims and the Philly Fed Manufacturing Index.
The Japanese yen has recorded considerable gains on Wednesday, buoyed by the growing political turmoil which has engulfed Washington. Media reports on Tuesday said that Trump asked former FBI director James Comey to end an investigation into ties between Russia and Trump’s former security adviser, Michael Flynn. This has led to speculation that Trump may have committed an obstruction of justice. Another brewing controversy is Trump’s passing of classified intelligence to the Russian foreign minister. Trump initially denied the claim, but has since backtracked, admitting that he did share intel with the Russians, but that he had acted within his rights. With the Trump administration busy putting out political fires, investors are growing increasingly nervous that the president’s agenda for a stimulus package and tax reform will stall.
Bank of Japan Governor Haruhiko Kuroda said on Wednesday that he was confident that the central bank could smoothly exit from its huge monetary stimulus when appropriate, but noted that wages and inflation remained sluggish, despite a stronger economy. Kuroda added that the central bank had no plans to revise its monetary stance, and said that the Federal Reserve’s tightening stance would not affect the decisions of the BoJ. Stronger global demand has boosted Japan’s manufacturing and export sectors, but inflation is stuck around zero percent and consumer spending remains soft. We’ll get a look at Tokyo Core CPI and other inflation indicators next week.
