Daily Economic Commentary: Japan

The Yen staged a rally last Friday against all the other majors except the dollar to close the week on a positive note. Will risk aversion surface this week to put the Yen back on the radar? We’ll have to wait and see.

Japan’s all industries activity index came in a lot higher than expected. The index rose by 3.8%, which is more than two folds of the market’s 1.6% estimate, in January. Among the index’s components, the one that rose the most was Japan’s construction sector which jumped by a whopping 17.3% following a very marginal 0.1% rise in December. The yen gained some support following the report.

This week will kick off with the release of the BOJ’s monetary policy meeting minutes today at 11:50 pm GMT. The BOJ recently doubled its quantitative easing program to ¥20 trillion ($222 billion) while holding its interest rate at a low of 0.10%. Prices are still falling in Japan at an annualized 1.8% decline in January. With the Japanese government restrained from doing more spending because of its huge debt, the pressure now is on the BOJ to do something to shore up the economy. Some economists, however, believe that the bank’s recent move will only have a minimal impact on the economy.

On Wednesday, Japan’s trade balance for the month of February will be reported. The country’s trade surplus is seen to have narrowed to ¥0.41 trillion from ¥0.73 trillion. Any decline here could further weigh on the JPY.

Japan will conclude the week with the release of the March Tokyo core CPI and the February national core CPI. Prices in Tokyo, which is Japan’s most populated city, are projected to have declined by 1.7% on an annualized basis in March. The national version of the account for February also shows a slight improvement in the change (drop) in prices. The national CPI is expected to be at -1.2% from -1.3%.

Supported by a wave of risk aversion, the yen found itself winning out against other major currencies early yesterday. The rally proved to be short lived though, as the yen erased most of its gains once the US afternoon trading session went underway.

No data was released yesterday since Japan banks were on holiday but earlier today, the BOJ’s monetary policy meeting minutes for the month of February came out. The minutes revealed that the bank, while deciding to keep rates unchanged, believes that it would have a difficult time finding a solution for falling prices.

As of the moment, deflation remains as one of Japan’s biggest problems. Despite setting rates at its lowest at 0.1% and injecting a large amount of money into the economy, businesses and consumers refuse to spend, which is pushing prices down further. It looks like the BOJ is all out of moves, and has no choice but to let things just play out…

On the docket today, at 11:50 pm GMT, is Japan’s trade balance. The trade balance measures the net difference in value between exported and imported goods of the country. A positive balance is also called a surplus, which means that more goods were exported than imported. The expectation is a 41 billion yen surplus for February, significantly lower than the 73 billion yen surplus in January.

While the USDJPY remained in range for the 12th day in a row, the yen remained mixed against other currencies. The yen fell against the Australian dollar, but posted some gains against the euro and pound. What could be in store for us today?

Trade balance figures were released late yesterday, coming out slightly better than expected. Japan hit a surplus of ¥470 billion last month, just beating predictions of a ¥410 billion figure. This indicates that more goods were exported than imported. Take note however, that January’s surplus was revised down from ¥710 billion to ¥650 billion.

Lately, the yen’s moves have been based on sentiment in other currencies. European currencies like the euro and pound have been falling against the yen as traders as they have been plagued by issues here and there. With no high impact data on deck today, watch out for strong moves in other currencies to direct the yen’s movement.

Kamikaze! The Japanese yen dove sharply against the US dollar yesterday as risk aversion revisited the markets. As a result, the USDJPY broke out of its range and rallied to a high of 92.40 during the US session.

Despite the weak economic figures from the US and the strong trade balance from Japan, the US dollar proved to be the more preferred lower-yielding currency yesterday. Risk aversion, which resulted from Portugal’s debt rating downgrade, pushed the safe-haven US dollar higher against the yen. Meanwhile, gains of the yen crosses were a bit more contained.

Only the corporate services price index was released from Japan yesterday. It printed a worse than expected annualized decline of 1.3% for February, highlighting the threat of deflation in the Asian economy.

Today, Japan will release the Tokyo core CPI and the national core CPI. Another round of year-over-year declines are expected for the month of February, with the Tokyo core CPI falling by 1.7% and the national core CPI dropping by 1.2%. This could push the yen to take another kamikaze dive today. Brace yourselves!

Nothing went right for the JPY yesterday as it went through another broad-based beating. The only people who were partying were the yen-bears. Will we see another round of yen whipping today or will the bears cash in their profits to end the month?

Yesterday, Japan released its Tokyo and national CPI figures. Tokyo, which is the most populated city in Japan, registered a worse-than-expected inflation number. March’s Tokyo CPI remained at -1.8% versus the markte’s estimate of -1.7%. February’s national CPI, however, recovered somewhat to -1.2% in February from -1.3%. In any case, Japan remains to be deep in deflation.

Some economists project that Japan will stay in a deflationary environment until 2013. Let’s see if the recent move of the BOJ to double its lending program could spark domestic consumption in the months ahead.

If you want to learn more about Japan’s present situation, my friend, Forex Gump, wrote an article about it yesterday. Kindly check it here.

Japan’s economic calendar is report-free today. Since it is the end of the month, the JPY short sellers could cover their positions and cash in their profits.

Due to the lack of economic news from Japan, the yen was unable to find direction last Friday. The currency managed to gain against US dollar but lost out versus the euro and the pound.

Earlier today, Japan released a pretty impressive retail sales report. The report revealed that retail sales in February rose by 4.2% year-on-year, more the double the initial prediction. The increase was also an improvement from January’s 2.3% and is the biggest increase since March 1997. Hmmm, it looks like all the stimulus measures are finally taking into effect…

Looking further ahead the day, we will see Japan’s reports on unemployment, household spending and preliminary industrial production. All of them will come out at 11:50 GMT tonight.

The expectation is that Japan’s unemployment rate in February remained at 4.9%. Meanwhile, the household spending report is predicted to gain by 1.5%, slightly lower than the previous month’s 1.7% increase. Lastly, the preliminary estimate on industrial production covering the same period is a drop of 0.5%.

On Wednesday, the Tankan manufacturing index is due. The index, which assesses whether Japan’s manufacturing industry is growing or not, is predicted to print a reading of -14 for the first quarter of this year, better than last quarter’s -24. Although an improvement, the reading is still below the base line 0, which means conditions in Japan’s manufacturing industry is worsening. Given all of Japan’s “headaches,” better-than-expected results on the report could just be what the yen bulls need.

Yen crosses took some hits in yesterdays trading rounds, as higher yielders benefited from a run of risk appetite. The EURJPY and GBJPY both saw themselves floating slightly higher. Could we see the same today? Or will the yen strike back?

Japan was hit with some poor economic data yesterday, as both the household spending and industrial production reports came in worse than expected. Household spending fell by 0.5%, after it was expected to have risen by 1.5%. Meanwhile, industrial production fell by 0.9% - consensus was for a decline of just 0.5%.

The labor market got some good news… well, good news in the sense that the unemployment rate didn’t go up! The jobless rate remained at 4.9%, which was in line with expectations.

No biggies coming out of Japan today, but that doesn’t mean you shouldn’t be on the lookout for data coming out from other counties! Watch out for shifts in risk sentiment, as this has been what’s driving the yen as of late.

The Japanese yen wasn’t in such a good mood yesterday as it fell against most of its counterparts, except for the euro. It seems like the yen still hasn’t moved on from the brunt of weak economic figures released earlier this week.

Only the manufacturing PMI was released from Japan yesterday. The report showed that the industry continues to expand as the reading stayed above the 50.0 mark. Still, the March manufacturing PMI dipped to 52.4 from 52.5 in February, implying that the expansion was slower during the month.

Does this mean that weak Tankan figures are in the cards? The Tankan survey, which is due 11:50 pm GMT today, could show that manufacturing and non-manufacturing conditions remained weak for the first quarter of the year. Although the readings are expected to stay in the negative zone, both the manufacturing and services component of the survey are expected to show that business conditions are worsening at a slower pace this time around.

My buddy Forex Gump has an interesting blow-by-blow analysis concerning the possible results of the Tankan survey, saying that weaker than expected figures could push the USDJPY above the 93.00 handle. Keep an eye out for that!

Risk appetite in the forex market drove the yen back on the sidelines yesterday. The yen slipped flat on its face against all of the other major currencies. Will it be able to recover some of its losses today? We’ll see.

Japan’s Tankan manufacturing index for the first quarter of 2010 improved to -14 from -24. The non-manufacturing version of the account also improved to -14, which is slightly better than the -15 consensus, from -22. A negative reading indicates a deteriorating condition in the sector. Despite this, the yen still managed to gain some support soon after the results were released because of a better than expected tally in Japan’s service sector. However, traders just took this as an opportunity to get a better price to sell the yen again. The yen continued to drop after due to the persistence of risk appetite in the market.

Later, BOJ Governor Masaaki Shirakawa will deliver a speech at the Bank of Japan. Any dovish statement there could send the yen lower. I doubt, however, that he would drop any hints regarding the bank’s future monetary policies since he will be speaking at a welcoming ceremony of new bank employees. Still, be on your toes!

The yen proved to be the biggest loser in last week’s trading sessions, falling in value against most major currencies. It looks like improving risk appetite will continue to put downward pressure on the yen’s value.

The only high-profile economic news to watch out for this week from Japan is the BOJ’s interest rate decision. It is widely expected for the BOJ to keep the benchmark interest rate unchanged at 0.10%, so the focus of traders would probably fall on the accompanying statement. If the bank decides to expand its quantitative easing program, then we could see the yen experience further losses. The BOJ will announce its decision on Wednesday.

For the first time in a week, the yen was able to slice the dollar like a sushi roll, as it posted some decent gains. Some see this as a technical correction given the strong upmove we have seen the past couple of weeks. Could this be an opportunity for traders to get in at a cheaper price?

No biggies coming out today, so watch out for news coming out from other countries. If risk appetite that was triggered from last week’s NFP report finally follows through, the yen may just give back its gains from yesterday.

Tomorrow should be more exciting, as the Bank of Japan will be making its interest rate statement. Remember, in its last monthly meeting, the central bank decided to expand quantitative easing measures. This month, traders will be waiting to see how upbeat the bank will be in their statement. If BOJ officials show more optimism and actually crack a smile or two, it may just give the yen more support.

The yen managed to squeeze some gains off the greenback, euro, and pound ahead of the release of the BOJ’s monetary policy statement. Strong economic figures also provided a boost for the yen, which closed at 93.89 against the greenback.

Japan’s composite set of leading indicators stepped up from 96.9% to 97.9% in February, marking its longest streak of gains since 1997. Whee! The recent improvement in Japan’s broadest measure of economic performance was led by a recovery in export demand. Components of the report showed that the surge in exports is starting to trickle down to employment and consumer spending, boosting Japan’s overall economy. Maybe this could lead the central bank to upgrade their growth forecasts for the year…

The BOJ has yet to release their monetary policy statement and hold a press conference probably later today. Keep an eye out for upbeat comments from central bank officials, which could allow the yen to push for more gains. Even though the BOJ is widely expected to keep rates at 0.1%, if they end up delivering a more bullish statement than the US Fed’s skeptical one yesterday, the USDJPY could make a mad dash for the 93.00 handle.

The yen dominated the FX market yesterday, banking a landslide win against ALL the other major currencies. Will the yen be able to extend its run?

Yesterday, the Bank of Japan kept its interest rate unchanged at 0.10% but also stated that the economy is already picking up. The improvements in the economy was said to have been due to the positive developments in some of its major trading partners. Domestic demand in Japan, however, is still fragile which places some pressure on the BOJ to hold its monetary easing policies.

Across the Pacific, the US consumer credit showed an unexpected drop of -$11.5 billion in February. A slide in credit indicates that consumer demand is not yet stable. Risk aversion, as a result, intensified which led investors back to the safety of the greenback and the yen.

Japan’s February core machinery orders also slid by 5.4% after already losing by 3.7% during the month prior. A drop here suggests that firms weren’t spending for capital expansions despite the increase in Japan’s exports. And soon after the result was released, the yen lost some support.

Japan will be releasing the BOJ’s monthly report and the Eco Watchers survey in March later at 5:00 am GMT. The BOJ recently stated that the economy is already improving but some data like the core machinery orders shows otherwise. In any case, any hawkish outlook could further lift the yen.

It looks like the yen’s massive correction has finally come to an end as it ended the day with a loss in yesterday’s trading session. The yen fell against the dollar, the pound and the euro.

The Bank of Japan’s monthly report released yesterday showed that was slightly more optimistic though. It revealed that the bank believes that financial credit conditions have eased due to their very accommodative monetary policy. Additionally, the bank said that deflation will soon moderate as demand for Japanese goods start to pick up.

No important data from Japan today so the yen would most likely be driven by risk sentiment flows and economic news coming out from other major economies, particularly Ben Bernanke’s speech at 12:30 am GMT today.

The yen took a hit across the board as risk appetite came back in vogue last Friday, although it did hold its own against the USD. After gaining 4 out of 5 days last week, will the yen continue to rally versus the “mighty” dollar?

It seems that risk sentiment has shifted, as word on the European grapevine is that the EU will be backing up Greece by providing a bailout package. This allowed investors to release a sigh of relief, as this is a sign of more unity from the EU.

No major data is scheduled for release this week. Just take note that the minutes of the last MPC meeting are due today at 11:50 pm GMT. This could give more insight as to what was discussed at the last meeting, like the BOJ’s views on interest rates, quantitative easing measures and what’s the best sushi place in Tokyo.

Keep 6:30 am GMT, Thursday (April 15) marked though, as Bank of Japan Governor Masaaki Shirakawa will be delivering a speech. As the head of the BOJ, his words can have an significant impact on the currency markets.

The Japanese yen must be popping a bottle of sake by now since it successfully erased some of its losses against the Aussie, euro, and pound. But would it be able to stay afloat now that the BOJ is split between extending and pausing its lending program?

The minutes from the latest BOJ monetary policy meeting showed that a couple of policymakers were very much opposed to adding to the central bank’s lending program. Aha, some dissenters in the ranks! Policymakers Tadao Noda and Miyako Suda insisted that there was no economic justification for further monetary policy easing. However, they were outnumbered as the rest of the policymakers voted to double the BOJ’s lending to commercial banks in order to fight deflation in the country.

Japan won’t be releasing any economic reports today so be aware of possible shifts in risk sentiment, which could affect the movement of the yen. Tomorrow, BOJ Governor Masaaki Shirakawa is scheduled to deliver a speech at 6:30 am GMT. Stay on your toes for hints on the BOJ’s future monetary policy moves!

The yen came out mixed yesterday, pocketing some marginal gains over all the other majors except the CAD and CHF. The yen could be bound for a major move today. The question now is: which way will it go?

Japan as well as the other countries did not release any market moving reports yesterday. The lack of major economic catalyst caused the yen to just trade in a range-bound manner. Today, though, could be different with the issuance of the US’s CPI and retail sales figures. Positive figures from these accounts could spur risk taking which could be detrimental for the JPY.

Today at 6:30 am GMT, BOJ Governor Masaaki Shirakawa will deliver a speech at the Annual Trust Companies Association, in Tokyo. Any dovish statement could further weaken the yen.

The yen found itself holding on to the short end of the stick when a slight case of risk appetite hit the foreign exchang markets yesterday. Although the yen ended the day hardly changed against the dollar, it gave up some ground versus the euro and the pound.

The only news of interest yesterday from Japan yesterday was a talk by BOJ Governor Masaaki Shirakawa. In his talk, he said that Japan has been showing signs of sustainable recovery, thanks to the pick up in global demand for its exports and the bank’s stimulus measures.

No data coming out today, so watch out for data coming out of the US for clues on where the yen is headed.

Karate chop! The yen waxed in and waxed out against higher yielders, with its most impressive hits coming against the euro. The EURJPY dropped almost 100 pips to close at 126.37.

Some analysts are pointing to the recent GDP report from China - which printed a ridonculous figure of 11.9% growth last quarter – as the primary reason why the yen gained yesterday. The argument is that China will need to curb their growth and one way they could do this is by letting the yuan appreciate. This caused some risk aversion to crawl back into the market, allowing the yen to rally. For more insight about China’s yuan issue, take a look at my buddy Forex Gump’s latest post.

With no major data coming out today, keep an eye out on news scheduled for release in other countries, as well as for any shifts in risk appetite. As I’ve said time and again, risk sentiment can change on a dime, so be careful!

Thanks to risk aversion, the Japanese yen enjoyed quite a nice run before last week came to a close. News of the Goldman Sachs fraud pushed the USDJPY to the 92.00 area during Friday’s US trading session.

When news of SEC’s fraud accusation to Goldman Sach’s broke out, equities fell and traders began to unwind their carry trades. Since most carry trades are financed through the lower-yielding Japanese yen, this unwinding caused yen pairs to lose ground. The AUDJPY tumbled to the 85.00 area while the EURJPY slid below 125.00.

Today, Japan is set to release its household confidence report and tertiary industry activity index. Household confidence is expected to improve in March as the index could climb from 39.8 to 40.2 during the month. Meanwhile, activity in the services index is expecting a 0.9% slowdown for February after enjoying a nice 2.9% pickup in January. Watch out for the actual figure at 11:50 pm GMT.

On Wednesday, Japan’s trade balance will be released at 11:50 pm GMT. Their trade surplus could widen from 0.47 trillion JPY to 0.66 trillion JPY, possibly reflecting an uptick in exports for the month of March. Stronger than expected figures could allow the yen to push for more gains.

No other economic reports are due from Japan for the rest of the week but keep your ears open for BOJ Governor Masaaki Shirakawa’s speech on Thursday. Be on the lookout for his assessment of the Japanese economy and for hints on the central bank’s future monetary policy moves.