Daily Economic Commentary: Japan

[PipDiddy]

Safe-haven flows propped up the lower-yielding Japanese yen in yesterday's trading, allowing USD/JPY to close nearly 50 pips down from its 79.97 open price and EUR/JPY to dip below the 100.00 handle. What's in store for these yen pairs today?

The BOJ kept its monetary policy unchanged during their statement yesterday as it kept is overnight rate at <0.1% as expected. BOJ Governor Shirakawa pointed out that Japan is still in the middle of warding off deflation and that cutting rates could result in more damage than good for the Japanese economy.

Today, Japan will release its annual CPI figure for May. Tokyo's core CPI is expected to show a 0.5% decline while the national core CPI could post a mere 0.1% uptick. Deflation sure is lookin' pretty nasty in their country yo!

Although risk-off trades could continue to lift the yen today, make sure you stay tuned for any updates in the euro zone situation and for Japan's CPI release if you're trading the yen pairs. Good luck!

[PipDiddy]

Due to the lack of top-tier economic reports from Japan, the yen's performance in yesterday's trading was mixed. It scored a 39-pip win against the euro at 99.77 but gave up 11 pips to the dollar when USD/JPY closed higher at 79.60.

In this old man's opinion, the reason why the yen wasn't able to extend its gains against the Greenback was because the dollar had a couple of relatively good economic reports that supported it on the charts yesterday.

Our forex calendar is once again blank for high-caliber reports from Japan today which probably means that we'll see the yen trade based on market sentiment. So be sure you keep tabs on the euro zone, ayt?

[PipDiddy]

The Japanese yen's performance was as mixed as a bag of nuts last Friday, but it did manage to end the week higher than its major counterparts. This week, the yen gapped down against its rivals so let's take a look at the catalysts that could get these gaps filled.

Over the weekend, the BOJ released its monetary policy meeting minutes which revealed that several officials felt wary about further easing as this could be misinterpreted as monetization by the central bank. This means that they are worried that the public might think that the BOJ's large asset purchases are being used to finance government spending, which isn't really the case.

Today, Japan is set to release a few reports which could result in additional volatility for the yen pairs. The household spending data is due 11:30 pm GMT and is expected to show an annualized 2.5% increase for April, weaker than the 3.4% growth seen last March. Meanwhile, the unemployment report could show that Japan's jobless rate held steady at 4.5% so make sure you watch out for that at 11:30 pm GMT as well.

A few minutes later, at 11:50 pm GMT, Japan will print its retail sales data for April. This report is also expected to highlight weaker consumer spending in Japan as the yearly figure could come in at 6.2%, much lower than the previous 10.3% increase.

[PipDiddy]

There ain't no stopping the yen! Among the three most traded currencies, it was the strongest performer as it posted gains against both the dollar and the euro. Will the markets continue buying up this safe haven currency?

So far, they haven't reacted much to the slew of reports that Japan dished out a couple hours ago. And I can't blame 'em! After all, the results were about as mixed as a bag of M&Ms!

While household spending recorded better-than-expected results with a 2.6% increase (versus forecasts for a 2.5% uptick), the unemployment rate unexpectedly rose from 4.5% to 4.6%, instead of staying flat. Meanwhile, retail sales data disappointed by following up March's 10.3% surge with a soft 5.8% increase (versus forecasts for a 6.2% uptick).

We don't have any other major reports coming out from Japan today, so for now, I suggest y'all keep track of risk sentiment. Remember, risk aversion is the yen's friend!

[PipDiddy]

With risk aversion dominating markets, who needs to look at Japan’s economic data? The yen roundhouse-kicked its counterparts down the charts again as concerns in the euro zone heated up. When will the yen’s supremacy end?

Not anytime soon, apparently. Despite weak economic reports from Japan, traders continued to buy the yen like it’s the last piece of prime steak in a meat shop. Japan’s manufacturing PMI came in at 50.7 in May, which is just where the PMI reading was last April.

Unfortunately, we won’t be seeing any more economic data today apart from the preliminary industrial production data scheduled at 11:50 pm GMT. Don’t worry, we’ll probably see plenty of action as the fight against contagion in the euro zone heats up. Not only that, I heard that there are also a couple of big reports from the other major economies!

Keep your head in the game, kids!

[PipDiddy]

Up, up, and awaaay! The yen was in high demand yesterday as risk aversion boosted the markets' interest in safe haven currencies. EUR/JPY slid 154 pips to land at 97.84, while GBP/JPY fell 190 pips to 122.43. Hmm... We've heard this story before, haven't we?

With the yen continuing its rampage on the charts, BOJ officials have started speaking up again, hinting at possible moves to stall - if not stop - the yen's rally. According to BOJ Deputy Governor Yamaguchi, the central bank may ease its policy further if deflation starts plaguing the Japanese economy again. I daresay, that ain't an impossibility, homies! The yen's rally and the recent decline in commodities can exert downward pressure on inflation!

In other news, the preliminary industrial production report for April just came out, and though it came in below expectations (0.2% vs. 0.6%), it didn't do much to quell demand for the yen. The average cash earnings report (0.8% vs. 1.1%) also disappointed but it didn't result in a yen sell-off, either.

It seems that risk sentiment is still the main force behind yen price action. That being the case, it would be wise to monitor developments in the euro zone if you plan on trading yen crosses!

[PipDiddy]

Boo yeah! There really is nothing like risk aversion to get traders hustlin' towards the yen's safety. Continued concerns about the fate of the euro as well as disappointing U.S. data allowed the currency to rally against all of its major counterparts yesterday.

USD/JPY closed around its 3-month low at 79.36, 74 pips below its opening price. Meanwhile, EUR/JPY incurred another 95-pip loss as it ended the day at 96.89.

There were a couple of disappointing reports from Japan yesterday but it seems that traders paid them no mind.

The country's industrial production came in lower than expected for April at 0.2% and disappointed the market's 0.6% forecast. Also, the average cash earnings report failed to impress, falling short of the market's 1.1% consensus at 0.8%.

Only the capital spending report for the second quarter of the year was scheduled on our forex calendar for the yen today and it came in higher at 3.3% versus the 1.3% forecast. Keep that in mind! Who knows, the better-than-expected report may just give traders one more reason to buy the yen in this risk averse market environment.

Good luck!

[PipDiddy]

It was almost a perfect day for the Japanese yen as it continued to advance against most of its major counterparts last Friday. USD/JPY dipped to a low of 77.66 before closing at 78.15 while GBP/JPY tumbled to the 120.00 handle. What's surprising was that the euro managed to sneak in some gains as EUR/JPY closed 15 pips up from its 96.89 open price!

Japan didn't release any economic data last Friday, as the Japanese yen turned to other economic reports that could keep fueling the safe-haven rally. Luckily for the yen, the U.S. NFP report came in much worse than expected and kept risk-taking in check.

This week, Japan has more than its usual set of events on deck so make sure y'all are in the loop! First up, BOJ Governor Masaaki Shirakawa is set to give a speech at 3:30 am GMT today and possibly drop some hints on the central bank's future monetary policy decisions. Of course, an added dose of volatility is expected during his speech so you should be careful out there!

The next economic release from Japan will come on Thursday in the form of its leading indicators. The reading is expected to dip from 96.4% in March to 95.2% in April, reflecting a slight dip in economic performance. Later on during the day, Japan will print its final GDP reading for the first quarter of 2012 and probably enjoy a bit of an upward revision from 1.0% to 1.1%.

Friday has the Economy Watchers sentiment index due and this report could print an improvement from 50.9 to 51.2 for May, reflecting stronger optimism for the Japanese economy.

[PipDiddy]

With risk appetite grumbling back into the market, the yen was set aside like an un-appetizing bowl of veggies. EUR/JPY finished 99 pips higher to close at 97.95, while GBP/JPY ended the day at 120.61, up 61 pips from its opening price.

Our buddies over at the Bank of Japan probably let out a sigh of relief yesterday when they saw all the green candles on yen pairs. After all, the yen had been on a major run in May and rumors were starting to circulate that the BOJ may intervene in the markets soon.

Now, I don’t have a crystal ball but I don’t think we’ll be seeing the BOJ do a drive-by on the markets and kill the yen. Not anytime soon at least.

Nothing lined up for Japan, but make sure you keep an eye out for news from the euro zone. If it appears that our amigos over in Europe aren’t any closer to fixing the situation in Spain, then it may trigger another round of risk aversion that could boost the yen once again.

[PipDiddy]

Boy, did the yen have a bad day yesterday. It scored losses against all of its major counterparts as more talks of intervention hit the markets. USD/JPY closed 38 pips above its opening price at 78.75. Meanwhile, EUR/JPY ended the day 11 pips above its opening price at 98.05.

Reports of Japanese Finance Minister Azumi getting G7 leaders to agree in helping out to counter strong currency moves had a bearish effect on the yen. The news spurred concerns that a BOJ intervention could happen sooner rather than later. Yikes!

Today, our forex calendar is blank for reports from Japan. However, we do have a lot of data from the euro zone. Be sure you keep tabs on them as they could affect the overall market sentiment and dictate the yen's price action as well!