USD/JPY has posted slight gains in the Monday session. In the North American session, USD/JPY is trading at 106.37, up 0.10% on the day. On the release front, the Tankan Indices were within expectations. Japanese Final Manufacturing PMI softened to 53.1, just shy of the estimate of 53.2 points. In the US, today’s key event is ISM Manufacturing PMI, which is expected to soften to 60.1 points.
Business confidence in Japan remained solid in the fourth quarter, according to the well-respected Tankan Indices. In the manufacturing sector, the indicator edged down from 25 to 24 points, and confidence in the services sector was unchanged at 23 points. The Japanese economy continues to perform well, boosted by stronger global demand. However, in the Tankan surveys, some business reported a shortage of skilled labor. Unemployment levels in Japan have fallen to 25-year lows, as the economy has improved while the working-age population continues to shrink.
Are we at the onset of a new global trading war? On Monday, China responded to recent US tariffs, imposing its own duties on a range of US goods, including frozen pork and wines. This move is bound to escalate tensions between the two economic giants, and has raised fears that a new global trade war could be underway. If the tit-for-tat measures continue, both the US and Chinese economies could suffer, which could lead to a global slowdown. Both sides are digging in tough and pointing fingers, and if tensions worsen, the volatility we’ve seen in the markets is likely to continue.
