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Japanese Yen Flat on EU Trade Deal, World Economic Forum Index

October 17, 2018 at 13:45 by Andrew Moran

Many Japanese coins on the banknotesThe Japanese yen is trading flat midweek after several mixed news reports came out pertaining to the world’s third-largest economy. While a new poll shows economists fear upcoming trade spats with the US will impact the Japanese economy, a new study discovered that Tokyo remains one of the most competitive places in the world today.

The US government has warned that it could institute 25% tariffs on Japanese automobile exports because of the nation’s immense $69 billion trade surplus. However, trade officials say that they will not apply these levies during trade negotiations. President Donald Trump is seeking a two-way agreement that reduces the surplus and boosts US exports to Tokyo.

Reuters survey of more than 30 analysts say that the likelihood of higher US tariffs on Japanese cars has fallen “significantly” or “to some extent.” That said, the poll did reveal that they believe Washington will modestly raise tariffs and that trade friction could result in a “very significant” effect on Tokyo.

The poll was conducted between October 3 and 12.

Could Japan withstand a trade storm with the world’s largest economy? A recent report suggests it might. According to a World Economic Forum (WEF) index, the top five most competitive economies are the US, Singapore, Germany, Switzerland, and Japan. The US and Japan notched the biggest gains from 2017.

Overall, the authors say the global economy will advance by 4% in 2018 and 2019, but noted that the escalating US-China trade war could produce “a range of risks and potential shocks.”

But Japan is attempting to combat the inevitable spar with Washington. In July, Tokyo signed the Japan-EU Economic Partnership Agreement, and it is set to be ratified in March 2019. It is the largest trade agreement signed by the two sides, accounting for 28% of the world’s gross domestic product (GDP). The pact aims to liberalize trade, particularly in the agriculture sector.

This comes as Chinese officials have urged the private sector to engage in more trade with their Japanese counterparts.

The USD/JPY currency pair was unchanged at 112.25 at 13:23 GMT on Wednesday. The EUR/JPY tumbled 0.35% to 129.48, from an opening of 129.98.

If you have any questions, comments, or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

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