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Yen weakens as Japan trade deficit widens on higher energy costs

USD/JPY rose about 0.2% to roughly 158.5 after Japan’s trade deficit widened to JPY 634.5 billion from JPY 409.9 billion.

Reported · Written up by our desk · Major Pairs

The Japanese yen underperformed its major currency peers on Thursday, with USD/JPY trading about 0.2% higher around 158.5 during the European session, according to FXStreet.

The yen’s softness was linked to a widening Japanese trade deficit driven by elevated energy prices. Japan’s Ministry of Finance reported the trade deficit expanded to JPY 634.5 billion from JPY 409.9 billion, while investors also looked for the fiscal deficit to widen further to JPY 680 billion.

Japan’s trade data showed imports jumped 27.8% year over year to a seasonally adjusted JPY 12.15 trillion, while exports grew 23.2%, faster than estimates of 19.9%.

On monetary policy, markets remained focused on expectations for the Bank of Japan to raise interest rates in September, with Standard Chartered now forecasting a 25 basis point hike on 18 September and additional 25 basis point moves afterward. Meanwhile, the US dollar faced pressure as Treasury yields fell, with the US Dollar Index (DXY) near its fresh seven-week low of 98.77 after a Treasury plan to increase long-maturity bond buying to curb high borrowing costs.

Latest closeUSD/JPY 159.31 ▼0.1%|Dollar index 99.64 ▼0.3%

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