The Yen continues retreating. Overview for 21.07.2020

USDJPY is rising on Tuesday; market players maintain their attitude to risks and do not require “safe haven” assets. 

The Japanese Yen has been cheapening against the USD for the third trading session in a row. The current quote for the instrument is 107.30.

At the moment, investors hope for the best and barely require “safe haven” assets, thus making the Yen retreat. However, it might even be good for Japan because the strong national currency interferes with the recovery of the country’s economy.

The statistics published in the morning showed that the Japanese Core CPI didn’t change in June after being  0.2% y/y in the previous month and against the expected reading of -0.1% y/y. The CPI also didn’t change and was +0.1% in June. At least, there was no deflation and that’s good. 

A possibility of deflation scares both politicians and economists because it may eliminate many years of efforts and trillions of Yen spend by the Bank of Japan and the Ministry of Finance to make the country’s inflation stable. 

So, what can the BoJ do to prevent the CPI from “going into the red”? To expand the stimulus measures. However, in this case, the national debt will increase in the shortest time. And that’s a problem which the Japanese authorities don’t know how to solve yet.