Japanese Prime Minister Shinzo Abe has called upon all business to collectively raise wages next year by the same amount as this year despite profit falls. Abe will hold talks with businesses and unions in the next Spring with the intention of getting some form of committal from business leaders. The so called “Abenomics” is around the principle of increasing business profits, which in turn boost wages and employee spending, which finally will increase inflation.

Japan has been in deflation for the best part of a generation and it looks like the stagnation could be set to stay. The recent boost in oil prices towards the end of this year could help to increase consumer prices as we move into 2017.

Whilst there is a negative interest rate and very little chances of inflation it seems unlikely the Japanese Yen will boost itself. However, in recent months it has been used repeatedly as a “safe haven” with so much disruption in the global economy. This has made the currency incredibly volatile with the GBP/JPY rate moving 6% in the last week.

Trump to meet with Abe first

PM Abe will be the first foreign leader to meet with Donald Trump in person since he was selected to be the first US Leader. Japan’s leader would like assurances that Trump will be committed to the US-Japan security alliance. Mr Trump during his election campaign said he would demand South-Korea and Japan to both contribute more towards the cost of having US troops based on their soil.

Trump has already back tracked on many of his extreme views looking for compromises and Abe will no doubt be hoping for the same. However, if Trump was to suggest Japan could fall under the 35% tariff that has been raised for Mexican and Chinese goods, then the Yen could be set to suffer further losses.

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