Japan Prepares To Expand State Of Emergency

USD/JPY struggled for a clear direction Tuesday, with both sides of the pair underperforming the bulk of G10 currencies amid broader risk-on flows. A confluence of factors helped S&P 500 register a fresh record high, while reducing demand for safe haven currencies.

• Japan's Covid-19 task force may formalise the declaration of emergency for another eight prefectures today. Local media outlets reported Tuesday that PM Suga discussed such a move for Hokkaido, Miyagi, Gfu, Aichi, Mie, Shiga, Okayama and Hiroshima with his key ministers. The state of emergency would take effect from Friday through Sep 12.
• The Nikkei reported that Japan would spend another Y1.4tn on Covid-19 measures and would expand subsidies for EV purchases.
• Final machine tool orders and a speech from BoJ's Nakamura headline the local docket today.
• USD/JPY last trades at Y109.68, just above neutral levels. A break above Aug 19 high of Y110.23 would allow bulls to take aim at Y110.46, which capped gains on Aug 13. Bears need a dip through Aug 16 low of Y109.11 before targeting Aug 4 low of Y108.72, the bear trigger.