The Japanese yen is finding support midweek as investors are pouring into safe-haven assets amid the continuation of the US-China trade war. Despite traditional safe-haven assets, such as the yen and gold, surging throughout geopolitical tensions and market uncertainties, this investment play has not exactly panned out. With the trade spat escalating this month, are investors concerned that this is a battle that will linger into next year?
Earlier this week, President Donald Trump completed his visit to Tokyo, where he met with Prime Minister Shinzo Abe regarding trade. At the end of the four-day tour, Trump said his aim was to eliminate trade barriers to increase US exports to Japan, adding that the trade imbalance is âunbelievably large.â
The US has a $59 billion trade deficit with Japan, down 8.1% from 2017.
During the trip, it was reported that China is âseriously consideringâ two things: restricting rare-earth exports to the US or ending US agriculture imports. Rare-earth minerals are critical for everyday items, including mobile phones, computer memory chips, and rechargeable batteries. US agriculture, particularly soybean, has already been decimated by tariffs.
Moreover, the president claimed that he is âin no rushâ to complete a new trade agreement, noting that businesses are fleeing Beijing and the country would have been better off if it agreed to the original deal. It has been reported the US is mulling over a policy of slapping tariffs on nations that devalue their currencies to boost exports.
While US-Japan trade talks are expected to be faster and more cordial, the prolonged US-China dispute is causing a headache for global markets. This has prompted traders to finally leap into safe-haven assets, which has not been the case for the last year.
On the data front, the Leading Economic Index slipped to 95.9 in March, down from 97.1 in February. The coincident index, a measurement of business conditions, came in at 99.4 in March, down from 100.5 in the previous month. Some analysts contend that the results of these indexes could signal that the worldâs third-largest economy might be slipping into a recession.
Meanwhile, Aiful Corp., a consumer lender that was on the cusp of insolvency a decade ago, is about to sell Japanâs first yen-denominated junk bond in public markets. This shows that Japan is thinking about taking on more risks as the Bank of Japan (BOJ) maintains subzero interest rates.
The USD/JPY currency pair dipped 0.01% to 109.36, from an opening of 109.37, at 16:56 GMT on Wednesday. The EUR/JPY tumbled 0.23% to 121.77, from an opening of 122.07.
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