The President of the European Council, Ant\u00f3nio Costa, and the President of the European Commission, Ursula von der Leyen, met with Japanese Prime Minister Shigeru Ishiba in Tokyo. This gathering took place at the 30th EU-Japan Summit. <\/p>\n
The primary focus of their discussion was enhancing cooperation to tackle unfair trade practices. This meeting comes as attention remains on trade relations between Japan and the US, which are pivotal for influencing Bank of Japan policy. <\/p>\n
While not market-moving, the EU-Japan dialogue adds to promising developments for Japan’s international relations. Domestic politics may further play a role in bolstering fiscal support within Japan.<\/p>\n
We view the summit between figures like von der Leyen and Ishiba as a minor positive, reinforcing a theme of Japan’s stable integration into global trade. While not a primary market driver, it subtly supports a bullish narrative for Japanese assets. This sentiment is better reflected in the Nikkei 225, which recently pushed past 34-year highs, signaling broad investor confidence.<\/p>\n
The more significant focus for traders remains on the Bank of Japan and the yen. Recent data shows Japan’s core inflation has remained above the central bank’s 2% target for over a year, with the latest figures hovering around 2.3%. This persistent inflation is the primary catalyst fueling speculation that the era of negative interest rates is nearing its end.<\/p>\n
Historically, a central bank shifting to a tightening policy leads to currency appreciation. Therefore, we believe derivative traders should be positioning for a stronger yen in the coming weeks and months. This could involve buying call options on the yen or puts on the USD\/JPY currency pair.<\/p>\n
The critical event to watch will be the “shunto” spring wage negotiations. Strong wage growth, potentially exceeding the 3.8% seen last year, would give the central bank the final justification it needs to raise interest rates. We anticipate that a positive outcome from these talks could trigger a significant and rapid move in the currency.<\/p>\n
Given this outlook, a prudent strategy involves protecting long Japanese equity positions from a rising yen. One might consider remaining long Nikkei 225 futures while simultaneously purchasing out-of-the-money puts on USD\/JPY. This allows for continued participation in the equity rally while hedging the substantial currency risk tied to a policy shift.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EU and Japan leaders meet in Tokyo, focusing on boosting cooperation against unfair trade practices.<\/p>\n","protected":false},"author":62,"featured_media":17044,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27024","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=27024"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27024\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17044"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=27024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=27024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=27024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}