Trump/Yen, Yen/Trump

The Central Bank of Japan apparently took seriously Trump's warning to its main trading partners - not to try to manipulate exchange rates.
According to well-known sources, the central bank of Japan is said to change its monetary policy. The explanation is - to make it more effective. Market participants, however, fear that its preparing for normalization is becoming a reality.
And this led to a fall of the Japanese Nikkei 225 by nearly 300 points and a serious appreciation of the yen. The dollar, which reached trading levels of 113 yen in the past week, traded at levels 111.18 on Tuesday evening.
Indeed, the dollar marked its largest decline against the main currencies for three weeks. The dollar index lost 0.8% of its value on Friday, with the loss of 1% against the yen, the US currency declining 0.7% against the euro.
The bond repurchase program was launched by the head of the Japanese bank in the distant 2013. The aim was to raise inflation.
Now, however, according to experts, the Japanese central bank has to make a lot of effort to persuade Trump's administration that it does not artificially lower the exchange rate of the yen against the dollar.
On the other hand, it appears that 2% inflation targeting the bank is an unattainable goal, even against the backdrop of serious monetary stimulus. Buying bonds, however, has led to an increase in government debt of over 40% over the past five years. At the same time, the goals of the Japanese central bank do not seem to be achieved. And this largely points to the ineffectiveness of the bank's policy.
Interest rates on 20-year Japanese government bonds also rose 6 basis points to 0.535 percent, moving away from their 18-month minimum at 0.475 percent earlier this month.
It has to be mentioned that the currency war is already a fact, as a continuation of the trade between the US and China. On Friday, President Donald Trump accused the major trading partners of the US of manipulating their exchange rates and thus receiving unfair competitive advantages.
We can recall that the trade war between the two leading economies started earlier this month, with the imposition of reciprocal duties on goods for $34 billion.

Exceptional growth for indices, the yen is cheaper

US indices rose sharply, and the dollar appreciated against the Japanese yen as a result of moderate optimism to find a way out of the potential trade war between the US and China.
More and more reports are being made of "quiet diplomacy" between the US and China to find a compromise on trade relations between the two countries.
The dollar index, which measures the performance of green money against the six major currencies, fell to 89.208, down from 89.49 at the end of last week.
The euro returned again at trading levels above 1.2400 against the dollar, while the British pound traded at 1.4221, compared to 1.4133 late on Friday.
Concerns about potential trade wars between the US and China, and other markets have triggered a rise in rescue currencies such as the yen and the Swiss franc.
However, with lower fears, investors reversed the dollar again to the Japanese yen. This led to a significant rise and three-digit growth in US indices, including the Dow Jones blue chip index.
US indices were close to "over-sold territory," after their fall in recent days, prompting many investors to target them in search of upward correction, according to market observers.

Forecast on USD/JPY

The Friday report on employment in the US did not have a significant impact on the currency market, only confirming the presence of positive changes in the economy of the country. In February, 313,000 jobs were created, which was the biggest monthly increase in 3,5 years. Although the unemployment rate has risen, and wage growth has slowed, the main thing is that these figures are high enough for, the Federal Reserve to raise interest rates later this month. Activity in the service sector continues to grow at a healthy pace, and judging by the Beige Book, the economy to grow modestly or moderately from January to February, and the narrowing of the gap between supply and demand in the labor market to lead to higher wages and inflation.
This week, the focus will be on inflation and consumer spending for February. It is expected that the costs will roll back after the fall at the beginning of the year. As in the case of the employment report, if data on consumer prices or retail sales are not horrible, Fed Chairman Jerome Powell will raise interest rates this week for the first time after his promotion. USD/JPY rose at the end of last week and could reach 108 if US stocks continue to strengthen.

The Yen - the greatest winner of future trade wars

Last week, President Trump shook the market with the imposition of imported duties for steel and other products. This immediately triggered talks about potential trade wars that have affected currency markets.
The potential US involvement in a trade war with other countries around the world has led to serious sales of US stock markets.
One currency, however, wins against all the tensions and has seen a serious appreciation over rivals. And that was the yen. According to investors and analysts, however, the appreciation of the yen is just beginning.
These events are largely reminiscent of what happened in the early 1990s when the US took protectionist measures against Japan.
The yen reached a record high of 79.75 yen per dollar in 1995, when similar protectionist actions were taken by the United States.
The proposed tariffs can reduce the US economy's growth by 0.2 percentage points next year, posing additional threats as to how US trading partners will react, analysts at Barclays Plc say.
In search of security, the traders turned to the yen, the Swiss franc and the euro. Trade-sensitive currencies, like the Canadian dollar, also declined.

The dollar continues to grow against the yen after the decision of the JCB

The US dollar continued its strong appreciation against the yen. The Japanese central bank has kept its ultra-stimulation program unchanged.
The dollar index dropped by 0.1 percent to 97.461, compared to 97.48 in the US session. The index is headed for an increase of 0.2% this week.
However, the dollar's growth continued against the yen after the Japanese central bank decided to keep its stimulus policy on Friday. By voting 7 against 2, the bank continued to maintain negative interest rates of 0.1%. The dollar rose to a trading level of 111.40 yen. For comparison, on Thursday, the currency pair traded about one yen down.
The Japanese bank said it expects the Japanese economy to continue its recovery, backed by a policy of mild monetary policy.