US-Japan trade talks stall over automotive sector; Japan sets aside $6.3 billion for protection.
USD/JPY fell after hitting resistance near 142; a break below may target 140 support level.
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Japan’s is an important factor in predicting what the Bank of Japan (BoJ) might do next. At its recent meeting, the BoJ chose not to change . This decision was mainly due to the uncertain global economy, especially because of a growing trade war.
However, if inflation keeps rising, the BoJ may have to raise interest rates later this year. At the same time, the US is expected to cut rates. If that happens, the could strengthen against the .
Today, Japan is hosting a major meeting of central bankers in Tokyo, similar to the Jackson Hole event in the US, where they are discussing current monetary policy issues.
Tough US-Japan Trade Negotiations
Talks between the US and Japan are ongoing, but there is still no trade deal in sight. Japan insists that any agreement must include the automotive sector, which has been a sticking point. Expecting a long negotiation process, the Japanese government has set aside $6.3 billion from its financial reserves to protect its economy. The money will mainly support small and medium-sized businesses.
Last month, forecasts warned that the trade conflict could slow Japan’s economic growth by up to 2%. Given that risk, Japan’s protective measures seem necessary.
Japan is not the only country facing trade tensions. Recently, Donald Trump said the US would impose 50% tariffs on goods from the European Union starting in early June due to stalled talks. After further discussions, the deadline was delayed to July 9. This shows how uncertain and unstable the global economy has become, affecting not just markets but businesses and governments worldwide.
Inflation in Japan Above Forecasts, Again
Inflation data released late last week shows that prices are still rising. The core CPI came in at 3.5% year-on-year, which was higher than expected. The last time inflation came in below forecasts was in July of last year. If this trend continues, we may soon match or even surpass the high levels seen in early 2023, when inflation was above 4%.
This week, investors should keep a close eye on two key US data points: and growth. Market expectations suggest that GDP will likely show slower quarter-on-quarter growth once again.
USD/JPY Technical Outlook
Over the past two weeks, the USD/JPY currency pair has been moving downward after hitting resistance around the 142 yen per dollar level. During this decline, sellers pushed the price down to a key demand zone, where the pair has now started to bounce back.
The main expectation is that the price will break below this level, which would likely lead to a move toward the key support around 140 yen per dollar.
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