Talking Points:
- The Japanese Yen was unmoved by official trade and current account data
- They expanded a familiar theme of strong export strength
- Investors are still wondering about domestic demand though
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The Japanese Yen continued to bump along the 114 level against the US Dollar Thursday following the release of some quite strong trade and investment data from its home country.
The March trade balance was ¥865.5 billion (US$7.6 billion), above the ¥850 billion expected but below the previous month’s ¥1076.8 billion. The current account balance was ¥2907 billion, well above the ¥2593 billion expected. The trade balance shows the state of flow between imports and exports out of Japan, while the current account includes all international flows, including fiscal transfers.
The data underscore a hopeful international trade picture for Japan, but one which contrasts to a large extent with a more subdued backdrop for domestic demand. The Yen had been clobbered earlier this week by news that Japanese wage settlements remain timorous. Hopes for any inflation boost from that direction look optimistic.
The Bank of Japan has been trying to stoke some domestic pricing power for years, without notable success. Last week in proclaimed itself confident that prices will rise during this easing cycle but their rate of increase remains far below the BoJ’s 2% target.
Still, economies must take their solace where they can find it and news that Japans’ vast export machine is still firing will be taken well by investors. However, as sidelong glances are now being cast China’s way thanks to worries that its economy may be slowing, investors may wonder how much longer global trade strength can endure.
USD/JPY rose to 114.36 after the data, from 114.27 just before it, but those gains didn’t last and the pair was soon back where it started. The greenback seems to have resumed a position of strength against the yen despite the wobble which came Wednesday on news that US President Donald Trump had controversially dismissed Federal Bureau of Investigation Director James Comey.
Up then back again: USD/JPY:
Created using IG Charts
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
