Despite indications the U.S. and China are preparing for a prolonged dispute over trade and other issues dimming the global economic prospects , the USD/JPY's downtrend has stalled because for global asset managers there are no alternatives (TINA) to relatively high-yielding, safe and liquid Treasuries.
Japanese and other investors also need to offset the cost of negatively or low-yielding government debt with higher risk investments to reach their investment return goals.
This makes pullbacks in equities attractive, limiting deleveraging flows that favor the haven yen.
And because U.S. rates have already priced in at least two Fed rate cuts this year, it will take a bigger dose of bad economic news or some other shock to speed the fall in U.S. rates and force derisking flows and USD/JPY selling.
Today's soft U.S. import prices and unexpected rise in jobless claims nLNSDHEF5D after soft CPI and NFPs keep money markets pricing in a July rate cut and at least one more before year-end, underpinned stocks and other yen-funded riskier trades.
USD/JPY may stagnate in a 108-109 range unless current Fed easing pricing looks like too little too late.
The June 19 FOMC should provide clues about the Fed's desire to fulfill the market's rate cut expectations.