It may seem strange to many that the threats of Donald Trump about import duties for China and Beijing's readiness to respond with a tit for tat do not lead to the strengthening of safe havens. According to research by Oxford Economics, the trade war between the two superpowers will slow the economy of each of them by 0.3%, BNP Paribas expects to see a 50% correction of US stock indices. It would seem, what is missing for "bears" in USD/JPY? Why does it not worsen the global appetite for risk? Alas, but between the plans and their implementation, as a rule, lies a huge chasm.

US Treasury Secretary Steve Mnuchin does not believe in a trade war, Presidential Economic Adviser Larry Kudlow argues that all shootouts end sooner or later with negotiations. The US administration, as it can, calms the financial markets, and they believe it. The S&P 500 is moving up and down, and the EUR/USD pair has completely frozen in the narrow trading range, contributing to a decrease in volatility in the Forex as a whole. Such conditions are unfavorable for funding currencies, including the yen.

Investors fear that Donald Trump, having dealt with China, will turn to other countries. At the same time, an increase in the US trade deficit with Japan by 3.4% y/y in February to $ 5.9 billion indicates that Tokyo will be the next victim of the White House's host. At the same time, the angry tweets of the US president will force the stock indices to sink and will strengthen the risks of strengthening the yen, which is clearly not included in the plans of the Bank of Japan.

Dynamics of the current account of Japan

It needs to normalize monetary policy under the conditions of a strong economy, with unemployment at 2.4% and other macroeconomic indicators to be positive. Including inflation, which has recently been actively rising in the direction of the target. According to Hideo Hayakawa, a former BoJ economist with 30 years of experience, the regulator will raise the target for the yield of 10-year bonds in the event that the basic inflation rises above 1%. If all this happens, then the downtrend in USD/JPY has a good chance of recovery.

Dynamics of inflation in Japan

However, events can develop in a completely different scenario. At least in the short term. Morgan Stanley believes that Beijing and Washington will sit at the negotiating table, the global appetite for risk will grow, which will lead to the development of a correction in the USD/JPY. Moreover, the US economy will accelerate in the second quarter, and the Fed will aggressively hike the rate on federal funds. Let me agree with the bank: the scoring of threats to their implementation will take a long time. In this regard, investors' attention will return to the divergence in the monetary policy of the Fed and the Bank of Japan, contributing to the development of a corrective movement in the USD/JPY pair.

Technically, on the daily chart of the analyzed instrument, the "Wolfe Waves" pattern was formed. Currently, its implementation is underway. Targets are located near the marks 108.1 and 108.85.

USD/JPY, daily chart