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Forex pairs in this Article » USD/JPY (London) - USD/JPY ended two days of declines on a wider than expected trade deficit, falling from a seven-week high.

Japan’s trade deficit widened to a recorded JPY11.47 trillion in 2013, according to statistics released this morning by the Ministry of Finance. The deficit jumped on yen weakness inflating import prices, almost doubling last year’s deficit of JPY6.94 trillion.

Fed meeting could reignite USD bullishness

USD/JPY had fallen to JPY102.66 ahead of the Japanese trade balance numbers. However, yen recovery will be short-lived if the US Federal Reserve moves to further taper quantitative easing programme following its two-day meeting, beginning tomorrow.

USD/JPY has been driven by diverging monetary policy expectations between the respective central banks. While the Bank of Japan has stated that it is prepared to expand its JPY7 trillion bond buying programme in a bid to fight deflationary pressures, the Fed is in a cycle of winding down its QE programme through a series of tapers. However the pair has crept up with the BoJ holding off on further easing while weak job numbers brought some uncertainty over the future pace of Fed tapering.

USD/JPY is currently trading at JPY102.44, up 0.18 percent on the session. The pair remains in slightly bullish territory from an opening of JOY101.9565.
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