USD/JPY Fundamental Daily Forecast – Kuroda Signals Readiness to Increase Monetary Stimulus

The Dollar/Yen is trading higher on Thursday, but volume remains light due to the holidays. Optimism over U.S.-China trade relations are helping to generate a slight upside bias. Recent stronger than expected U.S. economic data has driven down the chances of a Fed interest rate cut over the near-term, helping to make the U.S. Dollar a more attractive investment, while Bank of Japan comments suggest policymakers could lower rates again if prompted by a weaker economy.

At 11:13 GMT, the USD/JPY is trading 109.557, up 0.182 or +0.17%.

Japanese Economic Data

Economic data was scarce again overnight. In Japan, Housing Starts fell 12.7%, worse than the 7.9% forecast. Construction Orders came in at -1.2 percent versus the previously reported 6.4%.

RTT News reported that Japan’s housing starts logged a double-digit decline in November, data from the Ministry of Land, infrastructure, Transport and Tourism showed on Thursday.

Housing starts decreased 12.7 percent on a yearly basis, following a 7.4 percent drop in October. This was the fifth consecutive decrease in housing starts. Economists had forecast an 8.1 percent fall.

Annualized housing starts decreased to 834,000 in November from 879,000 in October. The expected level was 882,000.

Data also showed that construction orders received by big 50 contractors declined 1.2 percent on year in November, in contrast to an increase of 6.4 percent in October.

BOJ Kuroda Says Ready to Ease if 2% inflation Comes Under Threat

Bank of Japan Governor Haruhiko Kuroda said on Thursday that the central bank would ease policy further without hesitation if the momentum toward its 2% inflation goal came under threat, a sign of his readiness to top up its already massive monetary stimulus, according to Reuters.

Speaking at an annual meeting of Japan’s largest business lobby, Keidanren, however, Kuroda also offered a somewhat brighter view on the global economic outlook, bolstering the market view that the BOJ would not rush to alter its current policy for now.

“While continuing to carefully examine various risks, the BOJ will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost,” he said.

“Uncertainties over the global economy, including developments in U.S.-China trade negotiations, have eased somewhat,” Kuroda said.

Still, “the BOJ considers that downside risks regarding the outlook for the global economy remain significant.”

Kuroda gave few clues on Thursday as to what the BOJ would do next.

Daily Forecast

Later today, traders will get the opportunity to react to the latest data on U.S. Unemployment Claims at 13:30 GMT. Traders are looking for 222K, down from last week’s 234K.

Japan will release a slew of economic data early Friday.