The yen has started the new trading week with slight gains. In North American trade, USD/JPY is trading at 112.35, up 0.24% on the day. On the release front, Japan’s trade surplus jumped to JPY 0.32 trillion, crushing the forecast of JPY 0.21 trillion. Later in the day, Japan realizes All Industries Activity, with an estimate of -0.4%. In the US, the sole event is US CB Leading Index. The indicator gained 1.2%, above the forecast of 0.6%. On Tuesday, the US publishes Existing Home Sales. As well, US Federal Reserve Chair Janet Yellen will speak at an event in New York City.
US housing numbers ended the week on a positive note, easily beating expectations. Building Permits for single-family homes jumped to 1.30 million, above the estimate of 1.25 million. The annualized pace of 839,000 building permits in October was the fastest since September 2007. Housing Start also sparkled, accelerating to 1.29 million, compared to an estimate of 1.19 million. The catalyst for the strong numbers were hurricanes Harvey and Irma, which caused massive damage in the southern part of the US. With rebuilding efforts well underway, construction numbers should remain strong in the fourth quarter.
Japan’s trade surplus improved in October, buoyed by strong demand for Japanese exports. China is showing some momentum after a recent slowdown, and Japanese factories are having a hard time keeping up with the demand for automobiles, electronics and machinery. The robust manufacturing and export sectors have fueled a moderate recovery, as Japan has now posted 16 consecutive quarters of growth, the longest economic expansion since 2001. However, Preliminary GDP for Q3 came in at 0.3%, weaker than the 0.6% gain in Final GDP for the second quarter. Although the economy has improved in 2017, but this has not translated into higher inflation levels. Inflation remains persistently below the inflation target of around 2 percent, but the Bank of Japan has no plans to change policy. Earlier in the week, BoJ Governor Haruhiko Kuroda acknowledged the inflation issue, saying "it is not easy to quickly dispel the deflationary mindset that has formed over the course of 15 years of deflation." Kuroda added that he expects inflation levels to rise, but in the meantime the BoJ would continue its massive monetary easing, a key component of the "Abenomics" program.
