Bloomberg Daybreak: Asia Edition Japan Edges Higher on US Trade Negotiation Hopes
Apr 18, 2025
In this discussion, Mary Nicola, a Bloomberg MLIV Strategist based in Singapore, and James Demmert, Founder and Chief Investment Officer at Main Street Research, dive into the dynamics of Japanese stocks amidst trade talks. They highlight how rising inflation in Japan signals a pivot from deflation, while trade negotiations between the US and EU boost automotive sectors. The impact of US monetary policy comments and tariffs on Japan's economy raises concerns about market volatility, inviting fresh investment opportunities in Asia despite economic uncertainty.
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Rising Inflation, Delayed Tightening
- Japan's inflation is rising to about 2.9%, a significant change from years of deflation.
- However, rate hikes are delayed due to trade uncertainty, with market expectations for tightening drastically reduced.
US-Japan Trade as Global Indicator
- How the US treats Japan on trade is a benchmark for its approach to other allies.
- A poor deal for Japan could worsen market sentiment and ambiguities in US-China trade relations.
US Targets Yen Appreciation
- The Trump administration desires a much lower dollar-yen exchange rate, targeting around 130 yen.
- The yen is currently undervalued based on real effective exchange rates, supporting potential appreciation.