USD/JPY drops from 4-month high

The US dollar fluctuated lower in a narrow range against the Japanese Yen during the Asian session, to fall from its highest level since December 20, following developments and economic data released  by the Japanese economy, the third largest economy in the world, and on the threshold of the US economy's release of economic data expected Wednesday.

As of 05:50 GMT, USD/JPY dropped 0.02% to 111.98 compared to the opening levels at 112.00, after reaching the highest level in four months at 112.17, while the lowest at 111.92.

As we followed the Japanese economy's reading of the trade balance, which showed the overall surplus widened to 529 billion yen from 335 billion yen in February, beating expectations of a surplus of 363 billion yen, while the revised goods trade balance reading showed a deficit of 118 billion yen against a surplus of 116 billion yen from the previous, the current reading is better than forecasts of a deficit by 243 billion yen.

In the same vein, the annual reading of Japan's exports, the nerve of the world's third-largest economy, showed a 2.4% drop vs 1.2 percent in February's, beating expectations for a 2.6% increase, while imports rose 1.1% as it fell 6.6% in the previous annual reading for February, below expectations of a rise of 2.8%.

This came before the world's third-largest industrial sector released the final reading of the monthly industrial production, which showed that growth slowed to 0.7% from February's preliminary reading and expectations of 1.4%, with a 3.4% drop in January, while the annual reading of the same index showed a widening of the decline to 1.1% versus 1.0%, while the energy utilization rate increased by 1.0% against a decline of 4.7%.

The Bank of Japan Governor Haruhiko Kuroda said that monetary easing may be expanded if Inflationary pressures continue to fade, while inflation is still underpinned despite of strong conditions in the labor market, adding that there is no need to change the Central Bank's Inflationary target at 2 percent, explaining that investment fund purchases are not to stabilize the financial markets.

Kuroda also noted that exports are somewhat weak due to the slowdown in global economic growth, noting that capital spending is very strong and that he expects his country's economy to continue to grow moderately. He said earlier this week that Japan's economy slowed slightly recently, while wage growth has been somewhat disappointing.

Kuroda also noted that Japan's labor productivity registered faster growth than other developed countries, which weighed heavily on the performance of inflationary pressures. He also pointed out that there is a rise in prices in the service sector, which witnesses an increase in labor force. He added that the next step would be to cut interest rates, as the Japanese central bank has time to make a decision, adding that the yen is stabilizing between 110 and 120 per dollar and that level is convenient.

In the same context, the Japanese Economy Minister Hiroshige Sekō said during a press conference with the US Trade Representative Robert Lighthizer in Washington yesterday, that he had “frank and good” trade talks with his US counterpart, in response to US President Donald Trump's recent criticism on the trade surplus in favor of Japan with his country, which reached a peak of $69 billion and that he wants to reach a two-way deal to address it.

The comments were made by Japanese Economy Hiroshige Sekō after the launch of formal trade talks between Tokyo and Washington, which will continue until next Thursday, following the adoption of trade protectionism by the United States under the administration of President Trump, as many countries try to enter into trade negotiations with Trump's administration to avoid a trade war.

We would like to point out that the Japanese government recently  the Japanese government announced earlier this month a 10-day holiday from Saturday (27 April) to Monday (6 May) for Japan's celebrations of the new emperor there, which for crowning the Prince at the beginning of May, it's worth mentioning that this six-day holiday will be the longest in Japan's history.

On the other hand, investors are waiting for the US economy to release its reading for the trade balance, which may reflect a widening deficit to $53.5 billion versus $51.1 billion in January, before the final reading of the Final Wholesale Inventories index which may show Growth slowing to 0.4% from 1.2% in the February preliminary reading and the previous reading for January.

Leading to the FOMC Member Bullard Speech about the economy and monetary policy at the Hyman Minsky Conference hosted by Bard College, in New York. before the release of the Beige Book report, Which is important as it gets issued two weeks before the FOMC meeting.