Wednesday, August 30, 2017

Japanese yen is considered a safe-haven

The Japanese yen is considered a safe-haven asset, with the currency often showing volatility following geopolitical tensions. This has been the case this week, as the yen initially posted gains after North Korea fired a missile over Japanese territory on Tuesday, drawing sharp condemnations from Japan and the US. The easing of tensions since the missile launch has enabled the US dollar to recover and push above the symbolic 110 level. Still, if North Korea decides to fire another missile towards Japan, it’s a safe bet that the yen will gain ground.
Like other Western economies, Japan remains gripped with low inflation. This has resulted in the Bank of Japan keeping in place its ultra-accommodative monetary policy. Unlike the US and Europe, however, the BoJ has given no indications of tightening policy anytime soon, insisting that that inflation must first rise closer to its target of 2%. The economy is headed in right direction, as GDP has expanded for six consecutive quarters. In the second quarter, GDP impressed with a gain of 1.0%, well above the forecast of 0.6%. Still, with inflation nowhere near the BoJ’s target, the bank’s radical stimulus program is likely to remain in place for the foreseeable future.