Daily Economic Commentary: Japan

[PipDiddy]

It's a knock-out, folks! After yesterday's round of risk appetite, the Japanese Yen was unable to get back on its feet as its major counterparts threw in punch after punch. USD/JPY closed 5 pips shy of the 79.00 handle while EUR/JPY ended the day at 100.80.

Japan didn't release any economic data yesterday, leaving the yen at the mercy of risk sentiment. Unfortunately for the lower-yielding currency, markets seem to be pleased with Greece's progress on their coalition government as traders found the guts to buy higher-yielding currencies.

There are no reports on Japan's schedule until the end of the week, which means that the yen could stay sensitive to risk sentiment. Stay on your toes at all times!

[PipDiddy]

The yen took a big hit yesterday as speculations of more monetary easing from the Bank of Japan (BOJ) rose. According to news reports, lawmakers could pass a tax hike that could give the central bank a bit of room to ease further. The currency marked its second day of defeat versus the dollar as USD/JPY closed the day at 81 pips higher from its opening price during the Asian trading session yesterday.

No data was released yesterday and none will be released again today but I suspect that a reversal on USD/JPY’s downtrend may be in the cards. Looking at the bigger picture, there are some signs popping up that USD/JPY’s could rally higher. For instance, the falling trend line resistance on the daily has been broken. In addition, the last two candles have been very bullish, as USD/JPY closed very near its highs that day.

[PipDiddy]

The yen weakened slightly against its major counterparts last Friday as hopes of an agreement of euro zone officials stabilized risk aversion. USD/JPY inched 13 pips higher while EUR/JPY snuck in a 72-pip gain. What reports are set to come out from Japan this week?

The price of services bought by corporations will be released today at 11:50 pm GMT. After that, the next action we’ll see will come on Wednesday when Japan prints its retail sales data also at 11:50 pm GMT.

Thursday will be a big day as the manufacturing PMI, household spending, Japan and Tokyo’s CPI, jobless rate, and the preliminary industrial production are released between 11:15 to 11:30 pm GMT. Lastly, the housing starts data will come out on Friday at 5:00 am GMT.

Good luck trading this week, kids!

[PipDiddy]

No weakness here! The yen was pure muscle on the charts yesterday as it beefed up against all of its major counterparts. It snatched 84 pips away from the dollar, while gaining 140 pips against the euro and 123 pips against the pound. Can we expect more of the same today?

Maybe... that is, if risk sentiment continues to favor the yen! Yesterday's bout of risk aversion led to safe haven flows that benefited the Japanese currency, as traders avoided risk taking in light of uncertainty surrounding the European debt crisis.

No major Japanese reports on the economic calendar today, so it looks like risk sentiment will remain the key driver behind yen price action. Remember homies, when risk sentiment turns sour, expect the yen to show its power!

[PipDiddy]

Up-and-down day for the yen, as it edged higher against the dollar and euro but lost out against the pound. USD/JPY and EUR/JPY dropped 19 and 30 pips to finish at 79.45 and 99.27 respectively. Meanwhile, GBP/JPY ended the day at 124.28, up 27 pips from its opening price.

It appears that the lower house of the Japanese parliament passed the recent bill that was pushing to bring the consumption tax up to 10% within the next three years. Japanese Prime Minister Yoshihiko Noda’s Democratic Party, the Liberal Democratic Party and New Komeito joined forces to push the vote to an overwhelming 363 to 96. The bill will now be passed to the upper house, where it is expected to be approved.

Oddly enough though, a group of members from the Democratic Party, led by Party Leader Ichiro Ozama and 57 of his fanatics, all voted AGAINST the passing of the bill. Isn’t it weird that the Prime Minister and the Party Leader don’t agree on the same issue?

The truth is, political games are the norm in Japan. The bad news though, is that the instability may prove to be detrimental to the Japanese economy in the long-run, as it makes passing and implementation of economic programs much more difficult.

Later today at 11:50 pm GMT, Japanese retail sales will hit the airwaves. Expectations are that sales increased 3.1% year-on-year, slightly lower than last month’s 5.7% increase. A higher-than-anticipated result could spark a mini risk rally during the Tokyo session.

[PipDiddy]

The Japanese yen lost ground against most of its major counterparts, except for the British pound. GBP/JPY closed 18 pips down from its 124.28 open price while EUR/JPY chalked up a tiny gain as ended the day at 99.39. Can the yen bounce back today?

It seems that political troubles are brewing in Japan as lawmakers aren't seeing eye to eye when it comes to the newly passed consumption tax bill. However, several members of the lower house voted against the bill while Democratic Party of Japan leader Ichiro Ozawa is even considering forming a new political party on his own. Talk about drama!

As for economic releases, Japan's retail sales figure came in better than expected for May as it showed a 3.6% annual increase. Although this was much weaker than the 5.7% year-over-year increase printed last April, the May reading was still higher than the estimated 3.1% rise.

Japan is set to release inflation data along with its annual household spending report at 11:30 pm GMT today. Tokyo's core CPI figure is expected to dip by 0.7% while the national core CPI could see a mere 0.1% uptick. Although these reports aren't expected to move the yen pairs that much, it would be helpful to take note of how the actual results turn out in order to figure out what's next for the Japanese economy.

[PipDiddy]

Flawless victory! With risk sentiment working in favor of the yen, the Japanese currency was able to record solid gains against its top three counterparts. While USD/JPY ended the day 28 pips lower, EUR/JPY lost 50 pips and GBP/JPY slid 84 pips.

With the markets in full risk-off mode, the yen had an easy time making its way up the charts. However, Japan's releases might have had a hand in yesterday's strong demand for the yen as well. After all, it posted a couple of pretty upbeat economic reports - something we don't see too often from Japan!

The upside surprise in retail sales, which I discussed yesterday, started the day off and was followed up by a stronger-than-expected household spending report (4.0% vs 2.5%) and a lower-than-expected unemployment rate (4.4% vs 4.6%).

However, we also saw a fair share of downbeat data earlier today, as the national core CPI (-0.1% vs 0.1%) and preliminary industrial production (-3.1% vs -2.7%) fell below expectations.

Today, we only have housing starts data on tap (forecasted to show a 6.% increase following the previous 10.3% rise), so it looks like risk sentiment will continue to drive yen price action. If the markets remain risk averse, you can probably count on the yen to extend its gains!

[PipDiddy]

The yen painted the town red on Friday--with red candlesticks, that is! The Asian currency lost against all of its major counterparts as risk appetite kicked in. It gave up 41 pips to the dollar, 227 pips to the euro, and 194 pips to the pound.

As I explained in my EUR and USD commentaries, positive developments in the EU Summit pleased investors and sparked risk rally across the board. If you're a student of the School of Pipsology you probably know that the yen and risk appetite don't go well together.

It might not have also helped the yen that reports from Japan came in mixed. While household spending (4.0% vs 2.5%), Tokyo core CPI (-0.6% vs -0.7%), unemployment rate (4.4% vs 4.6%), and housing starts (9.3% vs 6.6%) came in better than expected for June, the preliminary industrial production report fell short of expectations (-3.1% vs -2.7%).

However, earlier today, the yen rallied against most of its counterparts following the Tankan reports for Q2 2012. Data from the bank of Japan revealed that manufacturing conditions weren't so bad during the quarter as most analysts predicted. The Tankan manufacturing index came in at -1 versus the -4 forecast. Meanwhile, the Tankan non-manufacturing index topped forecasts (consensus was at 6), printing at 8.

I'm not sure if the yen could sustain its run for the rest of the day though. That will probably depend on market sentiment. So make sure you gauge the market's mood ayt? Keep in mind that the yen usually rallies when risk aversion kicks in. Good luck!

[PipDiddy]

Thanks to better-than-expected Tankan surveys, the yen found itself recording wins against the dollar, euro, and pound to start the week. Is this a sign of things to come?

From the very get-go, the yen started the week strong and hardly looked back. It got a good, early boost from the release of the Tankan surveys, which both printed upside surprises.

The manufacturing index posted a reading of -1 instead of remaining at -4, as many had anticipated. Meanwhile, the non-manufacturing index surged from 5 to 8, instead of just ticking up to a reading of 6, as forecasts had predicted.

Of course, it also helped that markets weren't exactly in a risk-taking mood yesterday.

Unfortunately, the streak of good news ended today as the average cash earnings report came in disappointingly, showing a decline of 0.8%, instead of an increase of 0.6%.

Will this bog down demand for the yen? Well, that'll depend on the markets' risk appetite! Risk sentiment has become an increasingly important factor in trading in recent weeks, so it's hard to rule out more gains for the yen. After all, another bout of risk aversion may be just around the corner!

[PipDiddy]

What a terrible Tuesday for the yen! It lost to all of its major counterparts with USD/JPY closing 29 pips higher at 79.82, EUR/JPY up 53 pips at 100.63, and GBP/JPY ending the day 23 pips above its opening price at 125.24.

More important than the worse-than-expected average earnings report from Japan, political squabbles among Japanese officials weighed on the yen. It was reported that the value of employment income received by workers dropped by 0.8% in May and disappointed the market's consensus which was for a 0.6% increase.

Prime Ministers Noda's proposal to increase the consumption tax gave 36 lawmakers in Japan enough reason to resign. Although some argue that the mass resignation may actually be good for the country, political uncertainty never bodes well for the yen.

The issue will probably continue to dictate the currency's price action today given that our forex calendar is blank for Japanese economic reports. So stay tuned!