Japanese Yen Edges Lower, Inflation Report Next

The Japanese yen has posted slight gains in the Wednesday session. In the North American session, USD/JPY is trading at 110.97, down 0.21% on the day. On the release front, U.S New Home Sales dropped sharply to 631 thousand, well off the estimate of 669 thousand. This marked a 4-month low. Later in the day, Japan releases SPPI, which is expected to remain unchanged at 1.0%.

Recent trade tensions between the U.S and its trading partners have shaken investors worldwide, but the safe-haven Japanese yen has not reaped the benefits of nervous market sentiment. Investors are not rushing to buy Japanese assets when Japanese interest rates remain close to zero. At the same time, if the tariff battle intensifies and the Trump administration makes good on its threats to impose further tariffs, we could see a move towards the Japanese currency.

The yen has posted slight gains this week and touched a 2-week high in response to a report that the Bank of Japan was considering changes to its monetary policy, in particular, its interest rate targets. This has raised speculation that the Bank could be making plans to reduce its massive stimulus program. Japan’s 10-year yield climbed to 5-month high on Monday in response to the report. If there are further signals from the BoJ that policymakers are considering reducing stimulus, the yen could move higher.