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According to Jiji Press last week, the biggest business groups in Japan and Europe were preparing a joint letter to call for an early conclusion of economic partnership agreement negotiations between Japan and the European Union. This letter was announced by the Japan Business Federation, or Keidanren, and BusinessEurope on Monday in hopes of encouraging Japanese and European leaders to make political decisions to finalize a deal within this year despite increasing doubts over free trade talks involving the two economies plus the United States.

The letter read:

“During times of uncertainty, our partnership based on the shared values is more important than ever. […] We are writing to ask you to put all your efforts into accelerating the free trade pact negotiations so that they can be concluded within this year.”

 In a recent interview with the said press, director at the European group’s International Relations Department Luisa Santos said that the EPA negotiations are coming closer to an end. It wasn’t only just Santos who is urging the two countries to make concessions, but also European Commission Vice-President Jyrki Katainen, who said on Tuesday that he remained confident that the European Union and Japan can agree on a free trade deal by the end of 2016.

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Vice-President Jyrki Katainen Comments

"Our understanding is it is possible to conclude negotiations at the end of the year," Katainen said. "Some people find it difficult to accept free trade because it can lead to inequality. Our view is the more wealth there is, the more you have to divide up."

Katainen remains positive about the deal despite the differences that still remain over geographical indications, like rules that ties agricultural products to a specific region, and public procurement in the automobile industry. Within the Eurozone, the transportation sector is known for its negative stance on the pact. This is one evidence that hostility to free trade is widespread in Europe. Its critics even blame free trade for job losses and a widening income divide. If Europe failed to secure a deal with Japan, it could fuel concerns that free trade is in retreat on a global scale.

A free trade deal could add 0.6 to 0.8% points to Europe’s GDP growth, which is a great incentive to finish negotiations, Katainen said.

These talks has been going on since March 2013 so there are still concerns that further delays could lead to a loss of momentum. Uncertainty about the impact of Britain’s exit from the EU could also come to influence Japan’s opinion on the negotiations, especially since they are one of the countries which warned the UK that a lack of clarity about Brexit and loss of the benefits that access to the single market could lead some of its investors to move away.

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Currency Trade Analysis

The currency pair of both the countries involved in the mentioned negotiations, EUR/JPY, has closed low for four consecutive trading days. The pair has lost around 1.78% since September 14, the last time it closed on the green.

Looking at the bigger picture, the couple has been trading down since November of last year. It dropped further when the UK voted to leave the EU in June, and so far it hasn’t regained that level yet. The difference between its 200-day (at 122.161) and 50-day (at 114.652) SMA is around 6.15%. This far a difference is an indication that the pair would be unable to gain a longer upward momentum anytime soon.

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