Japanese Yen Surges As Manufacturing Returns to Expansion

The Japanese yen is roaring against several of its major currency rivals on Tuesday, buoyed by positive manufacturing numbers. But the gains were slightly capped on concerns over the intensifying trade war between the world’s two largest economies and what their fallout might mean for Tokyo.

Last month, Japanese manufacturing activity expanded for the first time since January as businesses hired more workers amid growing optimism pertaining to the economy, says a new survey.
In April, the Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) climbed to a seasonally-adjusted 50.2, up from 49.2 in March – anything above 50 indicates expansion.
The same survey did highlight that new export orders declined in April at a faster rate than in previous months. The measurement of new export orders slipped from 48.1 in March to 47.8 in April. This suggests that the damage imposed by the US-China trade spat and cooling global demand for semiconductors is real.
Meanwhile, the index gauging employment trends found the private sector was creating jobs at the fastest pace since November. This development is being supported by optimism over the one-year business outlook climbing to a five-month high.
Recently, President Donald Trump tweeted that the US would raise tariffs to 25% on $200 billion worth of Chinese imports, as well as slap tariffs on an additional $325 billion in Chinese goods. This sent global markets cratering, including the Nikkei – and it is still reeling. There are fears that when the US and Japan engage in trade talks that it might be as slow and uncertain as the US-China standoff.
The US and Japan trade approximately $220 billion a year, but there is a deficit of $68 billion. Once the White House focuses on this number, then it could create strife between the two economic powers. Many observers already believe that Tokyo will refuse to make any concessions to Washington, even if bilateral trade discussions hit a fork in the road.
The USD/JPY currency pair tumbled 0.36% to 110.37, from an opening of 110.77, at 16:22 GMT on Tuesday. The GBP/JPY fell 0.76% to 143.99, from an opening of 145.07.

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