Headlines do not bode well for US–China round two trade talks next week in Beijing, led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, where topics including intellectual property protection and structural reforms (market access and subsidies) are going to be discussed. A deadline of 2 March 2019 for finding a deal has officially been announced by Trump. The recent rise in JPY suggests that investors’ optimism is not growing, although the Japanese economy is not safe from Trump’s “America first” policy. Trump’s recent mention to Congress that it should pass the Reciprocal Tariff Act shows that the EU and Japan, US allies, could also become targets looking forward. Currently trading at 109.66, USD/JPY is heading along 109.40 short-term.
Inflation outlook cuts by the Bank of Japan for 2019 don’t seem to bother investors, who are favouring JPY as a safe haven currency, after US President Trump’s State of the Union address that didn’t provide any news on trade talks with China. It seems that US authorities are willing to enforce their right of extradition of Huawei CFO Meng Wanzhou and are willing to introduce sanctions for national security reasons against China-based telecom equipment supplier ZTE for suspicion of espionage, bad news for trade truce. There are probably good reasons for such a posture, as shown by Trump’s insistence on the need to invest in “cutting-edge industries of the future”, including AI and 5G wireless networks, China has become a major competitor in technology development.
By Vincent Mivelaz
