Daily Economic Commentary: Japan

[PipDiddy]

The Bank of Japan must have breathed a sigh of relief yesterday when the yen lost against its counterparts on a rally of risk appetite. USDJPY wormed its way to a 15-pip gain after dropping to an intraday low of 83.34. Meanwhile, EURJPY also tip-toed to a 37-pip rise and closed at 106.69.

It seemed that the markets were more interested in in the euro zone region than on Japan’s better-than-expected BSI manufacturing index report. The data climbed to its 13.3 index figure from 10.0 in the first quarter, and supported the strong current account numbers released yesterday.

Were these good data enough to put smiles on Japan’s citizens? We’ll know today at 5:00 am GMT when the household confidence report is released.

The final GDP report will also make an appearance today at 6:00 am GMT. The reading for the second quarter is expected to pick up to a 0.4% growth after printing 0.1% in its preliminary release a few weeks ago.

The last hurrah for the day will be the BOJ’s monetary policy meeting minutes at 11:50 pm GMT. Though market nerds expect to be bombarded with more of the “closely monitoring the price action” and “timely action” tunes, we might get a clearer picture on the BOJ’s economic sentiment with this report.

[PipDiddy]

Like Gru’s minions in Despicable Me, the yen was seen everywhere across the charts as it lost against the comdolls, and gained on the euro and the dollar. EURJPY leveled off to its 106.50 closing price after dipping to an intraday low of 105.96. Meanwhile, USDJPY inched by only 8 pips lower than its open price at 83.83.

The sentiment on the commodity-related economies and the disappointing reports from Japan added to the hodgepodge of risk appetite yesterday. Japan’s household confidence dropped to its 42.4 figure, and shocked the market geeks who forecasted the number at 43.8. Are the Japanese losing their smiling faces over the threats to their economy?

Good thing the positive machine tool orders for August made up for the sad faces by printing a 170.0% growth against July’s 144.9% growth figure. This supported the positive BSI manufacturing report, and tempered the concerns on Japan’s economic activity.

And this just in! A few Facebook pageviews ago, Japan released its better-than-expected final GDP report. After initially clocking in at 0.1%, it met the analyst expectations of a revised 0.4% figure.

No other report is on deck for Japan today, but keep close tabs on the Bank of Japan’s statements! With all the hullaballoo with the yen and the economy, I hear that even the BOJ is having trouble being consistent with their speeches! Oooh, this is going to be interesting!

[PipDiddy]

After setting a new 15-year high against the dollar, the yen finally gave up some of its gains to end the week. USDJPY managed to end 38 pips higher on Friday, to finish the week at 84.20. The question tickling my funny bone is, will traders just see this as another (cheaper!) chance to buy the yen?

The big news to hit the airwaves and drown out all that Japanese pop music was news that the Japanese government had finalized a new stimulus package to help prop up the Japanese economy. The package is worth approximately 915 billion Yen, and will be used to fight off the effects of deflation and the rapid appreciation of the yen. Right in line with the current government’s goals, the additional stimulus will aim to boost domestic demand and spending.

In other news, a Japanese official spoke out against the recent strength of the yen, this time putting the blame on China! Finance Minister Yoshihiko Noda called out China, questioning its recent yen purchasing. He said that it was unfair that China could buy Japanese bonds, but Japan could not purchase Chinese bonds. Noda even questioned China’s true intentions of buying yen bonds. Ahhh, don’t you love it when you see economic trash talk?!

No biggies coming out this week, but with all the high impact reports coming out from other countries, we could see bursts of volatility. Make sure you know what’s coming out by bookmarking the BabyPips.com economic calendar!

[PipDiddy]

Ha! I told you so! Didn’t I say traders will just see Friday’s move as a chance to buy the yen at a cheaper price? After reaching an intraday high of 84.37, USDJPY sold-off like iPADs on opening day to close the US trading session at 83.71.

Earlier today, another round of selling ensued to take USDJPY to new yearly lows. The yen crosses also followed suit and fell, with GBPJPY taking the brunt of the burn.

You’re probably thinking, “What’s causing this move? I don’t see anything important on the economic calendar!” Ah, let me explain.

Apparently, investors are turning to the yen because of the uncertainty surrounding the election of a new Democratic Party of Japan (DPJ) party president. There are currently two candidates for the position, one being Prime Minister Kan, and the other as Ichiro Ozawa. Much support is being given to Ozawa by the former Prime Minister Hatoyama, but surveys show that the DPJ race is still pretty tight.

Keep a close eye on the results of the elections closely folks, as its effect on the yen’s valuation could be huge! Ichiro Ozawa is known as a major supporter for outright FX intervention to weaken the yen, so a victory for him will be a... err, loss for the yen.

[PipDiddy]

King Kong ain’t got nothin’ on the yen! The Japanese currency was simply monstrous on the charts as it forged a new 15-year high against the Greenback. USDJPY was on a steady slope down as it fell 59 pips from its opening price of 83.68.

Prime Minister Kan took the yen along with him when he arose victorious the elections in Japan yesterday. But why?! You see, his opponent in the electoral race, Ozawa, is a well-known supporter of direct market interventions. So basically, traders see Kan’s win as a step towards a more laid-back approach to intervention.

Still, even Kan has his limits and you have to start wondering how long the government will continue to let the yen appreciate. Some say it’s unlikely that the BOJ will allow USDJPY to reach its record low of 79.75.

Will the yen continue to soar or will it decide to give the BOJ a break from all the headaches? Since Japan isn’t publishing any hard-hitting reports today, you ought to keep track of risk sentiment. If risk aversion ensues, the yen could be in for more gains.

[PipDiddy]

Boy, oh boy, am I at a loss for words! You would be too if you saw USDJPY jump over 200 pips in a span of four hours! The pair uncharacteristically sprung to life after the BOJ finally intervened to stop the yen from further appreciation. At the end of the day, USDJPY recorded a solid 250-pip gain as it closed at 85.60.

You’re watching history in the making, folks! Yesterday’s intervention was the first time Japan has stepped in in 6 years. After watching their currency climb up the charts week after week, the BOJ finally said “Enough is enough!” when USDJPY hit 83.00. Analysts estimate that the government shelled out as much as 1 trillion yen for the move.

The BOJ’s move may have caught some investors by surprise since Kan, who was less supportive of an intervention than his opponent, recently won the Democratic Party of Japan elections. But I guess everyone has their limits!

Don’t get too comfy now. The Ministry of Finance says they're not through with the intervention yet. For now, it’s best that we listen to what BOJ Governor Shirakawa has to say when he takes the stand at the Japanese Brokerages’ meeting at 6:00 am GMT.

[PipDiddy]

It appears like the effect of the intervention-kryptonite hasn’t faded yet as USDJPY traded well above the 85.00 handle all throughout yesterday’s trading. The yen was able to hustle the pair to an intraday low of 85.23, but the dollar took charge during the New York session. USDJPY closed 9 pips higher at 85.83 and so did EURJPY at 112.26, giving the yen an 89-pip loss.

We didn’t have anything on tap for the once-mighty yen but we did hear BoJ Governor Shirakawa talk. He implied that the government will continue its easy monetary policy stance saying that their quantitative easing tricks didn’t do much to boost the economy. Yikes! That doesn’t sound good for the yen. I wonder how that will affect its fate on the charts…

Our economic calendar is still blank for reports from Japan today. But if your planning to place your pips on the yen, remember that earlier this week the BoJ said there’s a POSSIBILITY of it intervening again. So, be extra careful! Good luck and may the pips be with you!

[PipDiddy]

Action on USDJPY was about as flat as a pug’s face. The pair basically stayed within a 30-pip range for the day. USDJPY was practically unchanged last Friday as it closed at 85.80.

With no reports coming from Japan, action was pretty subdued. Yo, do you think them bulls are getting tired? Or are they just taking a breather?

Unfortunately, we’ll have to wait until Saturday to get our first headliner from Japan. At 4:50 pm GMT, BOJ Governor Shirakawa is scheduled to make an appearance. It’s always worthy to see what the guy who calls the shots in the BOJ has to say. So you may want to set aside a few minutes of your weekend to hear him out!

[PipDiddy]

Not much action on USDJPY yesterday. In fact, since yesterday was Respect for the Aged Day in Japan, it was a total doser! USDJPY traded sideways and stayed within a tight range as the pair ended practically unchanged at 85.75.

Throw those sake bottles back in the cupboard! The Japanese bank holiday is over! But it looks like the press didn’t get the memo. We still don’t have any reports due from Japan today! In the meantime, keep risk sentiment in check as a bout of risk aversion may help the yen recover some of its recent losses.

Some say the yen may begin its rebound today. But be careful! If USDJPY drops back below 84.00, the BOJ may step in again.

[PipDiddy]

USDJPY headed south of the charts after opening at 85.75 and closed in favor of the yen at 85.10. Whoohoo! But as of this writing, the pair is already trading below the psychological handle! Am I hearing the bears singing, “Ain’t no intervention can keep us from you”?

The Fed’s dovish statement yesterday might have been enough for traders to short USDJPY despite threats of intervention from the BOJ. Then to make the yen more irresistible, there was the increase in Japan’s leading economic indicator to 100.0 in July from 98.2 in June which implies that we may see more hustle from the Japanese economy in the near future. Oh yeah!

Today we have the all industry activity index for July. It is projected to have increased to 1.0% during the month following its puny 0.1% growth in June. Given the pessimism surrounding the US economy, a better-than-expected figure may just give traders one more reason to root for the yen.

Be careful though! I don’t think Finance Minister Noda just meant monkey business when he said that the BoJ is ready pull the intervention trigger once more. Yikes! I’d look out for the 84.00 handle if I were you.