During the US President Donald Trump’s visit to Japan, Asian financial markets saw a rise in prices, especially in the stock market, as well as the strengthening of the Japanese yen (JPY) against the US dollar (USD). This market sentiment was caused by the prospect of a trade agreement between Japan and the US, but also with the rest of the Asian continent, including countries such as South Korea, Vietnam or Laos and so on. According to economic rapporteurs, the US-Japan trade agreement might be soon on the cards.
This fact was confirmed by US President Donald Trump in Tokyo at a joint press conference with Japanese Prime Minister Shinzo Abe on Monday, May 27, 2019 during his four-day visit to Japan. President Trump also said that he hopes to announce a trade agreement with Japan soon. In response to this announcement, backed by the American interest in this region and proved by the US state visit to Japan represented by US President Donald Trump in person, the Japanese yen has strengthened.
During the European trading morning on 28 May, 2019, at 7:46 CET on Forex market, the USD/JPY currency pair traded at an exchange rate of JPY 109.53 per USD with the trend of appreciation of USD by + 0.03%. However, according to analysts, even the value of the Japanese yen against the US dollar being at a price level below 110 JPY per USD suggests a relatively stronger position of the Japanese yen compared to the previous period in the short-term investment horizon. At the same time, these experts state that the interest of the Japanese central bank – Bank of Japan (BoJ) in the long-term domestic monetary policy strategy is not a strong Japanese yen against the US dollar, but rather the opposite. For these reasons, BoJ also maintains a slightly negative interest rate of – 0.10% p.a.
Along with the Japanese yen being affected by the visit of President Trump to Japan, with the promise of a possible trade agreement between the US and Japan, also the Asian stock market has seen increased volatility in its traded stock titles. For example, the Japanese Stock Exchange in Tokyo, according to its index indicator, the NIKKEI stock index at the close of Tuesday’s trading day 28 May, 2019 reported a daily increase of + 0.45% of its previous point value. On 28 May, 2019 the Hong Kong Stock Exchange also posted a daily growth of + 0.62% through its HSI stock index. Similarly, the Chinese stock index SHANGHAI documented a daily growth of + 0.81% on this day. For comparison in the end of last week markets experienced daily losses and reflected bear market trend.
The US president’s visit to Japan comes in the midst of a lengthy trade war between Washington and Beijing, with China firmly opposed to US demands for a change of its state-run economy. On Monday, May 27, 2019 Trump said that the US was “not yet ready” to sign an agreement with China. Donald Trump ended his four-day state visit to Japan on Tuesday, May 28, 2019. According to a press conference with Japanese Prime Minister Shizo Abe, both countries are trying to conclude a trade agreement. US President Trump said his goal is to remove trade barriers so that US export has a fair position in Japan, but also marked US trade imbalance with Japan as “unbelievably large” and hopes to resolve the issue. “The issues that America has with China, it also has … in theory with Japan on tariffs although … as you can see from what Trump is saying, he obviously feels closer to Japan,” said Hugh Young, head of Asia-Pacific at Aberdeen Standard Investments.