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James Hyerczyk

The Dollar/Yen is trading lower on Wednesday and threatening to take out last week’s low at 108.244 as concerns over the progress of U.S.-China trade negotiations have fueled another round of safe-haven buying of the Japanese Yen.

The move into the Yen is being fueled by worries that the two economic powerhouses have hit a snag in negotiations over the rollback of tariffs. Furthermore, President Trump fanned the flames by threatening to raise tariffs.

At 09:35 GMT, the USD/JPY is trading 108.451, down 0.091 or -0.08%.

Trump Threatens Higher Tariffs

During a meeting with his Cabinet on Tuesday, President Donald Trump threatened higher tariffs on Chinese goods if that country does not make a deal on trade. Trump’s comment is likely a response to reports that the two economic powerhouses have reached an apparent stalemate in trade negotiations that have lasted nearly two years.

“If we don’t make a deal with China, I’ll just raise the tariffs even higher,” Trump said in the meeting.


Japan’s Exports Post Worst Fall in 3 Years

Japan’s exports tumbled at their quickest pace in three years in October, threatening to tip the trade-reliant economy into recession as weakening demand from the United States and China darkened the outlook, according to Reuters.

Official data out on Wednesday showed Japan’s exports fell 9.2% year-on-year in October, a bigger decline than the 7.6% drop expected by economists in a Reuters poll.

The data comes after a preliminary reading of gross domestic product last week showed Japan’s economy post the worst growth in a year in the third quarter.

The Japanese government has said it plans to compile a stimulus package as soon as possible as a pre-emptive measure against heightening overseas risks.

BOJ Kuroda Runs Out of Firepower

Bank of Japan Governor Haruhiko Kuroda’s role as the prime focus for efforts to revive the world’s third-largest economy is coming to an end, according to Bloomberg.

An unprecedented level of concern about damaging side effects of Japan’s multi-decade experiment with ultra-low interest rates has gripped policy makers, regulators and legislators. The key takeaway:  fiscal policy is set for a more prominent part during the next economic downturn.

Daily Forecast

Look for the USD/JPY to remain under pressure on Wednesday as long as U.S.-China trade negotiations remain deadlocked over the rollback of tariffs. Lower demand for risky assets like stocks will fuel the move into the safe-haven Japanese Yen. Higher demand for gold and U.S. Treasurys will be additional signs that Wednesday will be a “risk-off” session.

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