The Future Path of Foreign Exchange Markets, Episode 112 [Tomotaro Tajima]
Tomotaro Tajima’s Profile
Economic analyst. President and CEO of Alfinaunts. Born in Tokyo in 1964. After graduating from Keio University, he transitioned from working at what is now Mitsubishi UFJ Securities to research and analysis spanning finance and the overall economy to strategic corporate management, and even personal asset formation and fund management. He serves as lecturer at private companies, financial institutions, newspapers, local governments, and various business and industrial associations for lectures, seminars, and training, with about 150 talks annually. He has written serialized columns and provided comments in print media, including Weekly SPA! “Rules of Net Trading,” and Examina “Money Maestro Training Course,” and has earned high regard as a stock and foreign exchange strategist across many websites. He also writes for Home Economics section of Jiyu Kokuminsha’s “Fundamental Knowledge of Contemporary Terms.” After regular appearances on TV (TV Asahi “Yajuuma Plus,” BS Asahi “Sunday Online”) and radio (MBS “Sting’s Asa-ichi Radio”), he currently serves as a regular commentator on Nikkei CNBC “Market Wrap” and Daiwa Securities Information TV “Economy Marche.” His major DVDs include “Very Easy to Understand: Tomotaro Tajima’s FX Introduction” and “Very Easy to Understand: Tomotaro Tajima’s FX Practical Technical Analysis.” His major books include “Wealth Revision Manual” (Paru Publishing), “FX Chart: The Formula for Profit” (Alchemix), “Why Can FX Make You Asset Rich?” (Text), among many others. His latest publication is “How to Profit by Riding the Rising US Economy” (Jiyu Kokuminsha).
※This article is a reprint and revision of an article from FX攻略.com, August 2019 issue. Please note that the market information described herein may differ from current market conditions.
Will US-China trade talks become a prolonged tug-of-war? A certain level of practicality is necessary
Looking back, the previous update was before a long holiday. At that time, the US stock indices, including the Philadelphia Semiconductor Index (SOX), the Nasdaq Composite, and the S&P 500, were surging to record highs, and the Nikkei Stock Average briefly rose to 22,362 on April 24, with the USD/JPY rising to as high as 112.40 that same day in a bullish turn.
However, near the end of the long holiday, President Trump suddenly performed a “table flip,” reversing the entire trend. This was arguably an event no one anticipated. It was later revealed that at the beginning of May, the Chinese government sent the US a draft agreement for the trade talks that had been built up over five months across seven areas and 150 pages, but it was inexplicably shortened and reduced to 105 pages. It is understandable that Trump would be furious, but Western “common sense” does not apply to China.
Experts say that “the two leaders’ dissatisfaction with the world order is inverted like a reflected image,” and that “both countries are revisionist powers who also want to maintain the status quo,” and thus neither side will yield easily. It is reported that the Xi Jinping leadership is calling for a prolonged stance domestically regarding the trade war with the United States. Within China, there appears to be internal dissent, and the future remains uncertain.
Regardless, given such circumstances, negotiations are likely to drag on for some time. In that context, we should avoid reacting emotionally to every statement by the leaders and media interpretations, and try to stay as balanced as possible.
After all, it is understood that US-China negotiations are a high-stakes bargaining process, and it is natural that blunt exchange happens before the surface. Markets, however, can be unusually sensitive, sometimes prompting risk-averse yen buying. What is needed is a degree of practicality: because it is a process of give-and-take, markets will swing between risk-off and risk-on. Perhaps it is a strategy to use that to your investment outcome. When a wave rises, a wave will also fall.
Of course, to do so you must calmly analyze each event as it happens and anticipate the other side’s next move. For example, initially the US government planned to impose sanctions on China’s telecom giant Huawei. This is, of course, one card in the bargaining, and if it has an effect, it could extract certain concessions through quiet negotiation between the two countries. Accept this with a clear mind and assess whether mutual concessions—so-called “progress in negotiations”—are possible, and weigh investment decisions to seize a better timing.
