THE TAKEAWAY:Japan’s July trade deficit widened more than expected > Could lead investors to expect more stimulus efforts from the BoJ to encourage growth > Investors also likely to weigh expectations on fiscal developments > USD/JPY Higher

The Japanese Yen traded lower against the US Dollar as Japan’s trade deficit widened more than expected to -1024.0 billion Yen in July. Imports grew 19.6 percent year-over-year and outpaced the 12.2 percent growth in exports. Although these rates of growth have not been seen since 2010, this data could still undermine Japan’s current recovery strategy and may lead investors to expect more stimulus from the Bank of Japan. However, investors will likely also have to weigh their expectations for monetary policy on developments on Japan’s fiscal front.

USD/JPY prices moved higher immediately after the release but did not move past 97.70. The pair then continued to move higher after Asian equities opened.

USD/JPY (5-Minute Chart)

Source: FXCM Marketscope

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Jimmy Yang, DailyFX Research Team

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