USD/JPY struggles during the Asian session below 112.00 mark

The US dollar fell against the Japanese yen during the Asian session to fall in the second session of its highest since December 20, following developments and economic data released by the Japanese economy, and on the threshold of developments and economic data expected Thursday by the US economy.

As of 05:51 GMT, USD/JPY declined 0.17% to 111.87, compared to the opening levels at 112.06, after recording a low of 111.85 and a high of 112.07.

We followed earlier the release of Markit's Flash Manufacturing PMI of Japan, the world's third-largest industrial country, which showed that deflation shrank to 49.5 from 49.2 in March, beating expectations of deflation to 49.4, bearing in mind that if the reading below indicates contraction of the sector, while above 50.0 indicates industry expansion.

The Japanese Minister of Economy, Hiroshige Sekō, expressed yesterday his hopes for positive results for the trade talks he is conducting on behalf of his country with the United States in Washington, which started at the beginning of this week and ends later today, adding that the talks are still at an early stage, and that he will hold talks with US Trade Representative Robert Lighthizer ahead of the Japan-US summit next week.

The Japanese minister yesterday also emphasized on the importance of leaving the discussion of financial and currency exchange issues to finance ministers, adding that Japan aims to reach a win-win agreement with the United States, particularly regarding the automobiles file, adding that no agreement has yet been reached, While stating that the Prime Minister of Japan, Shinzō Abe, visits to the United States may extend during the coming period due to trade talks.

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.

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 currently looking for the US economy to detect a reading of retail sales, which accounts for about half of consumer spending, which accounts for more than two thirds of US GDP, which could reflect a 0.9% rise versus a 0.2% fall in February, The core reading of the index itself rose 0.7% from 0.4% in February.

This comes in conjunction with the release of the US Jobless Claims reading for the week ended in April 13th, which may reflect an increase by 11,000 to a total of 207,000 versus the previous 196,000. In addition to the reading of the Philadelphia Manufacturing Index, which may reflect a contraction to 11.2 Compared to 13.7 in March, before the initial reading of the Flash Manufacturing and Services PMI by the Markit.

It is expected that the initial reading of the Manufacturing PMI index will extend to 52.8 compared to 52.4 in March, while the preliminary reading of the Services PMI may show a contraction of 55.0 vs 55.3, leading to the Business Inventories' reading that may indicate a slowdown in growth by 0.3% versus 0.8% in January, as the CB Leading indicators showed accelerated growth to 0.4% versus 0.2% in February.