USD/JPY Fundamental Daily Forecast – Flat on Caution Ahead of Tax Reform Vote

The Dollar/Yen is trading slightly higher after giving up earlier gains, on caution ahead of a vote in U.S. Congress on tax reform, after the bill moved another step closer to ratification over the weekend. The Forex pair moved higher on Friday after Republicans on the House-Senate negotiating committee ironed out a few concerns that had been raised a day earlier.

At 1110 GMT, the USD/JPY is trading 112.606, up 0.021 or +0.02%.

In other news, Japanese exports accelerated sharply in November, yet again pointing to growing momentum in the world’s third-biggest economy. However, inflation remained stubbornly low and well off the central bank’s 2 percent target.

A BOJ survey on Monday showed companies’ inflation expectations heightened only a touch in December from three months ago, despite a tight labor market and business confidence at over a decade high.

Separate data from the Ministry of Finance showed exports grew 16.2 percent in the year to November, beating a 14.6 percent gain expected by economists in a Reuters poll and accelerating from the prior month’s 14.0 percent increase, led by stellar sales to China and Asia.

Later this week, the BOJ will make its interest rate decision and issue its monetary policy statement. They will certainly discuss what the combination of steady growth and benign consumer prices means to BOJ monetary policy. Other major central banks are currently exiting crisis-era monetary stimulus, but the BOJ is widely expected to keep the liquidity tap wide open.