Japanese Yen tumbles to five-week low on US-China tariff deal

The Japanese yen has started the week with sharp losses. USD/JPY is trading at 148.18, up 1.9% on the day. Earlier, the yen strengthened to 148.59, its strongest level since April 3.

US and China agree to temporary cut in tariffs

The US and China have reached an agreement to slash tariffs on each other's products for 90 days. This would be a major de-escalation in the bruising tariff war between the world's two largest economies. Under the agreement, the US and China will slash tariffs by 115%, leaving US tariffs on China at 30% and China's tariffs on the US at 10%.

The tariff agreement has boosted risk appetite, sending global stock markets higher. The deal has weighed on safe-haven assets like the yen, which is sharply lower on Monday. Gold, another safe-haven, has plunged 3.1% today.

Japan's household spending, wages decelerate

In Japan, household spending and wage growth were down in March. Household spending decelerated to 0.4% m/m, down sharply from 3.5% in February. Average Cash Earnings declined to 2.1% y/y, down from a downwardly revised 2.7% a month earlier. There was more bad news as service-sentiment for April eased, reflecting concern over US tariffs.

These numbers support the case for the Bank of Japan to continue its wait-and-see stance before raising interest rates. The BoJ wants to see inflation remain sustainable at 2%, which will require higher wage growth and stronger consumer spending.

Fed members support Powell's wait-and-see stance

Over the weekend, a host of Fed members made public statements. New York Fed President John Williams and Fed Governor Adriana Kugler both noted that current rate policy was in an appropriate place and suggested patience was needed. This message echoed Fed Chair Powell's remarks at last week's FOMC meeting, when he said the Fed would take a wait-and-see attitude due to the uncertainty over US tariffs.