The Japanese yen has posted slight gains in the Wednesday session, after recording losses in the past two sessions. In North American trade, USD/JPY is trading at 113.15, up 0.06% on the day. On the release front, the Bank of Japan maintained its monetary policy. Japanese Preliminary Industrial Production dropped 1.1%, its fourth decline in five months. This was a much steeper decline than the estimate of -0.3%. Housing Starts slipped 1.5%, while consumer confidence came in at 43.0 points. Both indicators fell short of their estimates. In the U.S, ADP nonfarm payrolls came in at 227 thousand, much stronger than the estimate of 188 thousand. This is the first of a host of employment releases, highlighted by wage growth and nonfarm payrolls on Friday. On Thursday, the U.S releases unemployment claims and ISM Manufacturing PMI.
As expected, there were no surprises from the Bank of Japan, which wrapped up a policy meeting on Wednesday. Policymakers voted 7-2 to maintain interest rates at -0.10% and 10-year bond yields around zero. The BoJ said that it would maintain ultra-low rates for an “extended period” and the would allow more flexibility in the movement of 10-year bonds. On the inflation front, the BoJ reiterated that inflation levels would not reach the BoJ’s target of 2$ before March 2021. The policy statement added that there were currently more downside risks to the economy than upside, due to the impact of the tariff war between the U.S and China as well as the impasse over Brexit negotiations.
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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