The Japanese economy continues to suffer from China’s economic slowdown and Sino-American trade tensions. So the Bank of Japan voted 7-2 to maintain its policy balance rate unchanged at -0.10% while maintaining its target for 10-year bond yields along zero and annual bond purchases at JPY 80 trillion ($716.32 billion). We do not see any improvement coming. The US-China Trump-Xi meeting initially planned for mid-March has been postponed for 2-4 weeks. Until then, news will be foggy, and Chinese stimulus policies will not kick in until Q3. Currently trading at 111.65, USD/JPY is heading along 111.45 short-term.

Economic headwinds forced the BoJ to revise exports and production downward. January exports dropped -9% (prior: -5.80%), their lowest in three years and the third consecutive drop while imports have rebounded 0.50% (prior: -2.20%) in the same period. There was an unexpected pick up in the January current account balance of JPY 600.4 billion (prior: JPY 452.8 billion) amid a sharp rise in investment income due to an expansion phase in financial markets, yet the drop in January machine orders by 5.40% suggests further slowdown in Q1. BoJ’s change of language from “increasing as a trend” to “recently showed some weakness” shows the situation is not expected to improve until Q3. Assumptions of 2% inflation have now become wishful thinking.


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This report has been prepared by AC Markets and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by AC Markets personnel at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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