Daily Economic Commentary: Japan

[PipDiddy]

The yen shook things up yesterday as it traded mixed against other major currencies. The yen barely moved versus the safe haven dollar, but it did show some amazing strength against the European currencies like the euro and the pound. EUR/JPY fell to 100.08 from 100.63 while GBP/JPY dropped to 124.51 from 125.24.

There were no major news releases yesterday yet the yen was still able to get the upper hand. Most market participants believe that the ECB will cut rates and the BOE will implement another round of quantitative easing in their respective interest rate announcements.

Japan’s economic calendar today is pretty light, which means the yen’s direction will probably be driven by events happening in other major economies like the U.S. and the euro zone.

[PipDiddy]

Winner, winner, teriyaki dinner! The yen bulls took full advantage of the weakness in European currencies and by the end of the day, EUR/JPY and GBP/JPY closed 112 and 50 pips lower respectively. Will the yen continue to dominate to end the week?

We could be in for another jam-packed New York session as we’ve got the U.S. NFP report lined up at 12:30 pm GMT. Take note that this is a high impact report that affects even the yen crosses, so make sure you keep those stop losses in check and practice good risk management techniques! Good luck trading today homies!

[PipDiddy]

When risk aversion dominates the market, we all know which currency stands out! The low-yielding Japanese yen smashed its Western counterparts yesterday as the non-farm payrolls failed to meet expectations. The yen gained 117 pips over the euro and 71 pips versus the pound.

As I said in my U.S. write-up, risk aversion came back strong in the market due to the bad non-farm payrolls. The report only showed that only 80,000 net jobs were created versus the forecast of 97,000.

No major news report was released in Japan on Friday, but earlier today, the country's Current Account Balance was published. It showed a surplus of 280 billion JPY, almost half the 420 billion JPY surplus initially expected.

There's only one major report on Japan's economic calendar this week. On Thursday, the Bank of Japan (BOJ) will be announcing its decision on interest rates. The central bank is widely expected to keep rates unchanged below 0.10%, so the market’s focus will probably shift to the accompanying statement. If the BOJ announces more quantitative easing, we could see the yen sell-off.

[PipDiddy]

The yen was one of the losers in pipsville yesterday as bad data from Japan got mixed with profit-taking in markets. EUR/JPY and Guppy both inched 42 pips higher, while USD/JPY held steady with only a 4-pip slip. Will the yen turn its luck around today?

If it does, it probably won’t be from economic reports. Only the household confidence data at 5:00 am GMT and the tertiary industry activity and corporate goods price index at 11:50 pm GMT are scheduled for release today, so the yen bulls and bears will probably look at other major economies for some action.

Too bad that the yen didn’t get any support from yesterday’s data. Economic watchers in Japan had gloomier prospects for the economy as the Economic Watchers Sentiment data plunged from 47.2 to 43.8 in June. With the strong yen still hurting exports and consumer taxes due for a raise, who could blame them?

[PipDiddy]

Ah, there's nothing like a tinge of risk aversion to get the yen sprinting. The Asian currency once again outperformed most of its counterparts in yesterday's trading. EUR/JPY ended the day 71 pips lower at 97.29, while USD/JPY was down 17 pips at 79.41 by the end of the New York session.

Concerns about Europe as well as worries about the FOMC minutes signaling that QE3 could soon be underway helped lure traders into the yen's safety. The Tertiary Industry Activity report from Japan that was released earlier might also give you another reason to buy up the currency. (May's figure came in at 0.7% and topped the 0.2% forecast).

But be careful!

Keep in mind that the BOJ will announce its interest rate decision at 12:00 am tomorrow and word around the hood is, the central bank could launch more easing measures. If that becomes the case, we could see the yen get sold off!

Then again, that's just my two cents.

[PipDiddy]

To ease or not to ease? That’s the question that has gotten the yen bulls and bears busy lately. It looks like the yen bears won the tug-o-pip war yesterday though, since both USD/JPY and EUR/JPY enjoyed 27-pip rallies. So why are investors are pricing in more BOJ stimulus?

Well, Forex Gump has already given 3 reasons why the BOJ could play the QE card, but I think investors are really watching the country’s trade data.

Being a highly export-related economy, The Land of the Rising Sun needs a weak currency to profit. But with the yen still at overpriced levels against its counterparts and Japan’s trade balance hanging at deficit levels, the BOJ has more motivation to keep on pumping stimulus.

Only the BOJ is set for the spotlight today, so make sure you pay extra attention to the interest rate decision!

[PipDiddy]

Boo yah! The Japanese yen ended up higher against all of its major counterparts yesterday as the BOJ decided against further stimulus for Japan. USD/JPY spiked to a high of 79.96 then closed at 79.31 while EUR/JPY closed 21 pips below the 97.00 handle.

Volatility surged during the BOJ rate decision as traders were expecting to hear of fresh stimulus from the central bank. However, yen bears were disappointed to find out that, although the BOJ expanded their asset purchase program by 5 trillion JPY, they also cut their loan facility by the same amount. BOJ officials also hinted that they may purchase more treasury bills soon and possibly lower or remove the minimum bidding requirement for its credit lending operations.

Only a couple of medium-tier reports are due from Japan today and these are the revised industrial production figure for May and the BOJ monthly report. No revisions are expected for May's industrial production reading, which showed a 3.1% drop for the month.

With barely any market-moving reports from Japan, expect the yen to be strongly influenced by risk sentiment during today's trading sessions. Stay on your toes!

[PipDiddy]

Due to the absence of market-moving events in Japan, the yen didn’t exhibit much volatility last Friday. USD/JPY, for instance, simply traded within a tight range within a 30-pip range and closed just 5 pips lower from its opening price.

We may see more of the same this week as Japan has absolutely zero tier 1 events on the economic docket. There’s the Monetary Policy Meeting minutes and the All Industries Activity, but those two reports normally do not have an effect on price action.

Then again, there’s a lot of the U.S.’s plate which could indirectly affect the yen’s price action. We’ll just have to see!

[PipDiddy]

And on this corner, the undefeated heavyweight champion... The Japanese Yen! Thanks to weaker than expected U.S. data, risk aversion propped up the lower-yielding yen against all of its major counterparts yesterday. USD/JPY crashed below the 79.00 handle and closed at 78.85 while EUR/JPY ended the day 20 pips below the 97.00 handle.

Japanese traders and bankers were off on a holiday yesterday but this didn't stop the yen from bagging plenty of gains. U.S. consumer spending data, which came in weaker than expected and posted its third consecutive monthly decline, forced traders to flee to the yen's safe-haven arms.

Only the BOJ monetary policy meeting minutes are due from Japan today and this release is expected to shed light on the Japanese central bank's most recent policy decision. It could also contain some hints on future monetary policy moves so make sure you keep close tabs on the release at 11:50 pm GMT.

[PipDiddy]

Losses, losses everywhere! The yen just couldn't catch a break yesterday as it weakened against all of its major counterparts. While USD/JPY rose 25 pips, EUR/JPY rallied 40 pips and GBP/JPY climbed 50 pips. Will the Japanese currency see more losses today?

Not much from Japan yesterday, though we did get a few interesting words from Finance Minister Jen Azumi. Apparently, Japan is back to playing its old game of scare the markets with words, a.k.a. jawboning! Azumi threatened to take action to weaken the yen if it continues rising up the charts. But will this be enough to keep buyers away?

Lucky for Azumi, the markets aren't too interested in the safe haven yen at the moment, as QE3 speculation seems to be fueling bets on higher-yielding currencies. But if risk sentiment turns sour again, the yen could very well end up back on top!

Japan won't be publishing any reports today, so in the meantime, keep tabs on risk sentiment. Keep in mind that if another risk rally ensues, the yen may weaken further. Good luck and happy pippin'!