Daily Economic Commentary: Japan

[PipDiddy]

The yen's scorecard for yesterday's trading was as mixed as a bag of nuts. While it was able to score an 8-pip win against the euro, it gave up 17 pips to the dollar.

Although there wasn't any economic report released from Japan, there were plenty of remarks about the yen's strength. The country's vice finance minister for international affairs said outright that the yen's strength since the outbreak of the 2008 financial crisis is hampering the economy.

Of course, that got talks about another BOJ intervention swirling! With that said, make sure you keep an ear out for more comments from Japanese officials in today's trading.

Also, if you plan on trading the yen, keep in mind that the retail sales report for July printed a 0.8% contraction and disappointed the forecast which was for a 0.1% uptick. The currency rallied following the release of the negative figure, but be on your toes! Who knows, traders may soon change their mind about the yen.

[PipDiddy]

When risk is off, the yen's game is on! The Japanese currency dominated its major counterparts yesterday as risk sentiment favored safe haven currencies. It snatched 40 pips from the British pound, while gaining 23 pips against the euro. Can we expect more of the same today?

It seems all is not well in the 3rd largest economy in the world. Retail sales were worse than expected last month, showing a 0.8% year-on-year decline instead of the tiny 0.1% slide that most had predicted. As it turns out, bad weather had a lot to do with it, though some say that consumers kept from spending because they got smaller summer bonuses. That's enough to burst anyone's bubble!

Earlier today, the reports surprised to the upside as household spending data revealed a 1.7% increase (versus forecasts which called for a 1.2% uptick). Meanwhile, the unemployment rate held steady at 4.3%, just as the core CPI printed a 0.3% decline in prices as expected.

No more reports today, but do keep a close eye on developments in Jackson Hole. Ben Bernanke is set to deliver a speech, and if he disappoints the market with no hints about further easing, it could lead to another yen rally.

[PipDiddy]

The Japanese yen had a mixed performance last Friday as it gained against the U.S. dollar and the Aussie but lost ground to the pound, euro, and Loonie. Will it be able to find a clearer direction today?

Risk sentiment got tossed this way and that, leaving the yen confused about which direction to take last Friday. As it turns out, Bernanke disappointed the markets by failing to set a clearer road map for the Fed's monetary policy stance, causing the Greenback to give way to the Japanese yen. Meanwhile, S&P's downgrade of Catalonia and Bankia's need for capital injection triggered a quick run of risk aversion towards the end of the day.

There aren't any major releases due from Japan this week but make sure you mark your schedules for BOJ Governor Masaaki Shirakawa's speech at 3:40 am GMT on Thursday. As central bank, I'm pretty sure he could have a lot to say regarding monetary policy in Japan. Stay on your toes!

[PipDiddy]

Due to the absence of market-moving events, the yen lacked direction yesterday and simply moved within a relatively tight range. It topped out at 78.41 and found a bottom at 78.20.

There were some data releases, but none of them were particularly important. The Capital Spending report showed that new capital expenditures by businesses rose 7.7% while the Monetary Base report showed a 6.5% increase. Lastly, Average Cash Earnings were reported to have fallen 1.2%, four times worse than forecast.

No economic reports scheduled to be published today, so the yen’s price action could be similar to yesterday. Watch out for the previous day highs and lows, as they could serve as today’s inflection points.

[PipDiddy]

The yen sure loves to mix it up, doesn't it? The Japanese currency was able to end the day higher against the euro and Aussie but it chalked up some losses against the U.S. dollar, pound, and Loonie. Will it find a clearer direction today?

Japan didn't release any major reports yesterday, and this was probably the reason for the yen's mixed performance. The only Japanese report released was the average cash earnings which showed another annualized decline for July.

There are no reports on Japan's schedule today which means that the yen might take its cue from risk sentiment. Stay on your toes!

[PipDiddy]

As usual, USD/JPY was a ghost town as it barely slipped 4 pips to finish at 78.39. On the other hand, EUR/JPY continued to consolidate between 99.00 and 98.00, ending the day 19 pips higher at 98.72. Will these pairs finally bust a move today?

No numbers were released from Japan yesterday, but Bank of Japan member Miyao had a thing or two to say to break the silence. He said that Japan is facing serious headwinds in its recovery, and he's worried that exports may not rise enough to carry the burden of growth.

But what's most notable is that Miyao mentioned that they must act and take "bold steps when necessary." Hmm... Could he be hinting at a future intervention? After all, a direct market intervention could help Japan's exports industry pick up steam.

The only thing on the calendar for Japan today is a speech from BOJ Governor Shirakawa at 3:40 am GMT. After Miyao's soft jawboning yesterday, it'll be interesting to hear what the central bank head has to say. If he join Miyao and hints at more action in the future, it could lead to a yen sell-off, so stay tuned!

[PipDiddy]

Geronimoooo!!! The yen got triple roundhouse kicked by its counterparts yesterday thanks to a broad-based rally in high-yielding currencies. EUR/JPY rocketed by 98 pips, while GBP/JPY enjoyed a nice 110-pip boost. Why did the yen react so strongly against its counterparts?

One possible reason is that there were no economic reports scheduled for release in the Land of the Rising Sun. With Japan’s docket empty for the day, traders found it easy to dump the yen once risk appetite surged in markets.

If you haven’t been keeping tabs, you should know that it was a combo of good economic data from the U.S. and an optimistic bond-buying program by the ECB that inspired a broad-based risk rally.

Only the leading indicators data at 5:00 am GMT is scheduled for release today, so you might want to pay attention to any possible market-moving reports from the other major economies. More specifically, keep your eyes on the big U.S. NFP report coming up at 12:30 pm GMT, which could determine if the Fed is launching its QE3 program next week.

[PipDiddy]

While the yen took a few heavy blows from the euro, it dealt the dollar a harsh beating as well. EUR/JPY ended 53 pips higher at 100.23, just as USD/JPY slipped 63 pips to 78.27.

While we did see a strong risk rally (which usually results in big gains for yen crosses), USD/JPY's enormous drop sort of took the edge off yen sellers and kept yen crosses from lifting off.

As for economic reports, nothing major was released last Friday, but earlier today we got a look at a couple of noteworthy numbers.

Japan's current account surplus narrowed more than expected as it slimmed down from .77 trillion JPY to .34 trillion JPY (instead of .39 trillion JPY, as forecasted). Apparently, slower exports are to blame for this downside surprise. If this keeps up, I wouldn't be surprised to hear the BOJ jawbone some more!

Also, we got a look at the final GDP for Q2 2012, and boy was it ugly. It turns out that the 0.3% growth that the government had estimated for last quarter was a bit too generous... the economy only expanded by 0.2% according to its final estimates! Capital spending was weak in Q2, as Japanese companies kept their hands in their pockets due to external economic threats stemming from the euro zone debt crisis and threats of a global economic slow down.

No more reports from Japan for the rest of the day but do keep an eye on risk sentiment as it will probably be the key driver for yen price action today. Good luck, fellas! Start this week on a strong note!

[PipDiddy]

With a slight wave of risk aversion hitting the market, the yen got a nice boost and finished ahead of the euro and pound in yesterday’s trading matches. EUR/JPY dropped 38 pips to end at 99.84, while GBP/JPY finished 23 pips lower at 125.12.

Earlier, the BSI manufacturing index came in slightly better than expected, printing a reading of 2.5, after it was projected to come in at 6.1. This indicates slight optimism from large Japanese manufacturers, as this marks the first time in eight months that the index came in above 0.0.

Early tomorrow, we get more second-tier data in the form of core machinery orders. Word on the street is that companies spent 1.8% more on machines and equipment last month. If the report comes in worse than expected and indicates that companies are spending less on big ticket items, it could indicate concern about future sales growth, as companies wouldn’t normally spend on machinery unless they felt that orders would pick up.

[PipDiddy]

The Japanese yen's performance was as mixed as a bag of M&Ms as it ended higher against the U.S. dollar, Loonie, and pound but lost ground to the rest of its major counterparts. What's driving the Japanese yen these days?

Japan released a couple of medium-tier reports yesterday, both of which came in better than expectations. BSI manufacturing index, which tracks the business sentiment among large manufacturers in Japan, came in at 2.5 for the third quarter of 2012. This was a significant improvement over the -5.7 reading, which indicated pessimism, for the previous quarter. M2 money stock, which shows the change in domestic currency in circulation, posted a 2.4% increase which was better than the estimated 2.3% uptick.

Today, Japan released a few low-impact reports during the Asian session and the data was somewhat mixed. Core machinery orders saw a 4.6% jump in July while tertiary industry activity suffered a 0.8% drop, worse than the estimated 0.4% decline.

No other reports are due from Japan for the rest of the trading sessions today so make sure you keep close tabs on market sentiment to figure out where the yen is headed. Don't forget that Japanese finance officials, along with several market participants, are watching USD/JPY like hawks since it is currently treading close to intervention levels.