The Japanese yen has posted considerable losses in the Monday session, erasing Friday’s gains. In North American trade, USD/JPY is trading at 112.80, up 0.38% on the day. On the release front, the BoJ winds up its policy meeting and will release a policy statement. As well, Japan will release Preliminary Industrial Production, with an estimate of -0.2%. In the U.S, CB consumer confidence dipped to 137.9, but still beat the forecast of 136.3 points.
All eyes are on the Bank of Japan, but investors and analysts have learned to watch out for tweaks to monetary policy rather than any substantive moves. This could include minor changes to the way that the BoJ times its bond purchases, or other tweaks which will not cause significant volatility in exchange rates. The bank is expected to maintain interest rates at -0.10% and continue its massive stimulus program, which has had limited success in boosting inflation. The BoJ’s inflation target of around 2% could take years to be met, but policymakers have no plans to lower the target.
Japanese retail sales in September posted a solid gain of 2.1%, matching the estimate. This was the 11th straight gain in retail sales, pointing to strong consumer spending, a key driver of economic growth. The Japanese Ministry of Economy, Trade and Industry (METI) noted that high costs for food and energy boosted retail sales. METI upgraded its assessment, saying that retail sales were improving “gradually”. At the same time, the export-reliant Japanese economy is very vulnerable to the fall-out from the global trade war, and the threat by President Trump to impose tariffs on all Chinese goods could spell more headwinds for the Japanese yen.
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