Daily Economic Commentary: Japan

Trading Discussion News and Economy
348

While it beefed up against every other major currency, even the mighty yen couldn’t hold off the Greenback’s advances yesterday. USD/JPY ended its four-day slide and soared to as high as 81.93, only to come back down to close at 81.54, up 36 pips for the day.

An unusual show of strength from the Greenback, more than anything else, was to blame for USD/JPY’s climb. Profit-taking, China’s surprise 0.25% rate hike, and not-so-dovish words from Fed officials all teamed up to give the Greenback a boost against the yen.

But against the other majors, the yen flexed its muscles as it ignored the Cabinet’s decision to lower its economic assessment for the first time in 20 months in its economic report for October. The government cited weak global demand and the rising yen as the reasons why the economy is at a standstill.

Over the coming months, exports and industrial output are expected to weaken as well. With such a bleak economic outlook, the BOJ may just get its wish for a weaker yen.

No hard-hitting reports for us today. For now, stay on your toes as words from government officials from either Japan or the U.S. may cause surprise moves in USD/JPY. Good luck, kids!

349

And the yen does it again! The Asian currency hustled some muscle to its new 15-year high against the dollar at 80.85 just before the Fed’s Beige Book report. Sweet! USD/JPY then inched up a bit and ended the day 45 pips lower at 81.09.

  The [BOJ](http://http://www.babypips.com/forexpedia/BOJ) ain’t happy with the yen flexin’ its guns on the charts though. Now the pressure for it to intervene has intensified given that the pair is flirting with the 81.00 handle.

But some of our buds here in the FX hood are saying that another BOJ intervention is unlikely before the G20 meeting when Japan works its charm to convince other nations to help it control excessive moves in the currency market.

If you ask me, the chances of the G20 actually saying “yes” to the BOJ seems pretty low, so you may want to take extra precaution in betting your pips on the yen. Who knows, the central bank could step in the market if the All Industry Activity index for August, due later at 4:30 am GMT, comes in worse than the expected 0.3% decline. Yikes!

Be careful out there, aight? Good luck!

350

It looks like the BOJ and yen bears may just have their prayers answered! The yen slid against the USD as U.S. Treasury Secretary Timothy Geithner gave USD/JPY a boost after speaking up about the USD/JPY. The pair recorded a modest 15-pip climb and finished at 81.34, but not before it spiked up to tap 81.83.

What caused the massive midday spike in USD/JPY was Geithner’s statement that there’s “no need for the dollar to sink further against the euro and yen.” Basically, his words give the BOJ the go signal for future market interventions, as the Japanese central bank now knows that they share the same view as and may find support from the U.S. with regards to USD/JPY.

We’ve seen in the past that interventions were much more effective when it was a coordinated effort and involved multiple central banks, rather than a single central bank.

As for economic data, we learned yesterday that production fell 0.4% as expected in August, according to the METI all industry activity report. This leaves the July’s 1.1% uptick as the only increase in the past four months. With production growth on a decline, it’s no wonder the BOJ decided to adopt a new asset purchase program to keep the economy chugging along.

Nothing more to see from Japan today. But all eyes are set on South Korea, where world leaders will be congregating for the G20 meetings due to start later today. Don’t miss it!

351

The yen was like a rock the way it acted on the charts last Friday! Though it swung high and low for a while, it eventually ended up practically unchanged against most of its counterparts. USD/JPY was just 2 pips higher at 81.36 at the end of the day while EUR/JPY moved 6 pips up to close at 113.32.

Action was pretty boring on all markets last Friday as investors chilled ahead of the G20 meetings. Over the weekend, G20 officials vowed to avoid currency manipulation.

Sure, this seems like great news for countries like the U.S. which were hoping to see the Chinese yuan appreciate freely. But what about Japan who has been unsuccessfully intervening in the markets to rein in the rising yen? Some say that if the world leaders don’t come to an agreement, it may invite the BOJ to weaken their currency either by further intervention or in their upcoming rate decision.

So far, the yen seems like it’s off to a strong start to the week thanks, in part, to cool economic data. Earlier today, Japan’s trade balance figures came in 90 billion JPY above expectations at 590 billion JPY. It seems that the export industry has been holding up much better than expected despite the yen’s appreciation. Can you imagine how much better the country’s trade would be if they weren’t weighed down by the yen’s strength?

You’d better stay up late on Wednesday because we have another potential market-mover with the September retail sales report on tap at 11:50 pm GMT. As domestic demand has been weak lately, experts are predicting year-on-year growth to soften from 4.3% to 3.2%.

Then all hell breaks loose on Thursday when Japan dumps a massive amount of data on our tables. Not only will the BOJ be making its monetary policy statement and interest rate decision that day, but it will also be holding its press conference and publishing its outlook report. Whew!

To top it all off, the CPI report is due at 11:30 pm GMT and is slated to show a 1.0% year-on-year downtick in prices to match the previous month’s decrease. Japan hasn’t posted rising prices this year yet! Do I smell deflation?

At the same time, household spending data is scheduled for release and may show a year-on-year increase of 0.8%, down from 1.7% in August. Also, Japan’s unemployment rate is expected to hold steady at 5.1%.

And last but not least, at 11:50 pm GMT, Japan will be rolling out its preliminary industrial production report. Analysts are quite pessimistic with this one and predicted a 0.6% decline to follow up the previous month’s 0.5% drop. After seeing last week’s disappointing METI all industry activity figures, they might be right to expect a big fall.

As always, be on the lookout for better-than-expected figures which may boost the yen higher and give the BOJ a bigger headache. Good luck!

352

Someone should call the fire department ‘cause the yen in smokin’! Hollah! The Asian currency was sizzlin’ as it posted a new 15-year high against the dollar at 80.41. At the end of the day, USD/JPY was at 80.79 with the yen burning 45 pips from its counterpart.

  Aside from talks of [QE](http://www.babypips.com/forexpedia/Quantitative_Easing)2 which has gotten traders pursuing the lower-yielding currency for quite some time now, there was also Japan’s [trade balance](http://www.babypips.com/forexpedia/Trade_Balance) for September that made the yen look sexier.

  Yesterday we saw that the [exports](http://www.babypips.com/forexpedia/Exports) outpaced [imports](http://www.babypips.com/forexpedia/Imports) by 590 billion JPY in September, which was better than the anticipated 500 billion JPY surplus. This means that the Japan’s trade balance is up by 54.0% from a year earlier to 797 billion JPY. 

  But with USD/JPY nearing the 80.00 handle, it seems like the [BOJ](http://www.babypips.com/forexpedia/BOJ) could find the yen too hot for Japan’s exporters to handle. Some naysayers are already talking about another round of [intervention](http://www.babypips.com/forexpedia/Intervention). Yikes! 

  With that said, you might wanna take extra precaution in betting your pips on the yen. Note that during the [G20](http://www.babypips.com/forexpedia/G20) meeting, Finance Minsiter Noda said that [deflation](http://www.babypips.com/forexpedia/Deflation) remains to be a problem in the country and the CSPI report for September just confirmed the bank’s worry. 

  Earlier today, we saw that prices of services purchased by corporations declined by 1.1% during the month and disappointed the softer 1.0% fall that the market was bracing for. 

  Uh oh. Better be careful out there my piptastic friends. May the pips be with ya!
353

The performance of the yen crosses was as mixed as a David Guetta remix yesterday. The Japanese yen weakened against the US dollar and sterling, consolidated against the Australian dollar, and strengthened against the euro. What’s up with that?

Japan didn’t release any economic reports yesterday, leaving the yen pretty much all over the place. Better than expected U.S. and U.K. data allowed the dollar and sterling to outpace the yen. Meanwhile, the worse than expected German consumer confidence reading caused EUR/JPY to slide down. Australia didn’t release any top-tier reports, which was probably why AUD/JPY was stuck in consolidation.

Today, Japan is set to release its retail sales figure for September. On an annualized basis, retail sales is expected to have risen by 3.3%. This would be 1% less than the retail sales reading in August, reflecting how consumer spending slowed down recently. If the actual results come in weaker than expected, the Japanese yen could be in for some losses. Make sure you stay on the lookout for the report due 11:50 pm GMT.

354

Except for AUD/JPY which plunged after Australia released weak inflation figures, consolidation was the name of the game for most yen pairs yesterday. That was probably because most yen traders were sitting on the edge of their seats waiting for the Japanese retail sales figure and the BOJ rate statement.

The freshly released Japanese retail sales report turned out to be a disappointment as it posted a mere 1.2% year-over-year increase instead of the estimated 3.2% rise. It was bad enough that the consensus for September was much less than the previously seen 4.3% annual increase, and now the actual figure came in worse. Ouch!

However, yen pairs seemed to be indifferent to the weak retail sales figure, probably because traders are still reluctant to take a position ahead of the BOJ statement. Recall that the Japanese central bank already slashed rates to almost zero in their last monetary policy decision. Who knows what other surprises they have for us this time? More downbeat comments from BOJ officials could push the yen lower, but if they decided to be a bit more optimistic, then yen could breathe a sigh of relief. Their rate statement is due anytime today so make sure you stay on your toes!

355

Aha, it looks like the yen found its mojo yesterday as it erased most of the losses it scored against the dollar in the previous couple of days. After opening at 81.70, USD/JPY went on a downtrend until the day’s close at 81.04.

It was a good thing for the Asian currency that traders seemed to have been more worried about the size of the Fed’s QE program than the downgrade that the BOJ made in Japan’s growth forecasts. But perhaps the market was just happy that BOJ Governor Shirakawa didn’t talk about further increases in the bank’s asset purchase program when he announced the bank’s decision to keep borrowing costs between 0.0%-0.1%. Whew!

If I’m not mistaken, I think Forex Gump will be talking about this in his blog today. You can check out his page for more details on the BOJ’s decision.

Anyway, on the economic front, we saw that the manufacturing PMI for October was lower at 47.2 than September’s 49.5 reading. Uh oh. Then to add further disappointment, there were the household spending and preliminary industrial production reports for September.

It was reported that consumer expenditure was flat during the month when the market was expecting it to have been up by 0.8%. On the other hand, the industrial sector showed further contraction when its preliminary index printed at -1.9%, falling short of the softer 0.5% decline that the market was bracing for.

There was also the National CPI report for the October which showed that prices declined by 1.1% on an annual basis, and disappointed the -1.0% forecast. On the other hand, the Tokyo version of the report showed that deflation wasn’t as bad during the month at -0.5% than what analysts were expecting at -0.8%.

Lastly, the Statistics Bureau reported that the labor market showed some hustle in September with the unemployment rate lower by 0.1% at 5.0% than its previous reading and its forecast.

Hmmm, I wonder how this mixed roster of economic hollers will affect the yen’s fate on the charts. You may want to keep an ear out for updates from the BOJ because I don’t think they’re all smiles for the currency struttin’ with so much swagger.

And oh, before I forget, we have the housing starts report later today at 5:00 am GMT. On an annual basis, economic gurus are eyeing it to have been lower at 15.3% in September than it was in August when it printed at 20.5%. Note that a better-than-expected figure will probably be bullish for the yen.

That’s all folks! Happy trading!

356

Was it just a sugar rush, or did I see the yen rise further in the pip charts?! Despite printing less-than-encouraging economic reports last Thursday, currency bulls flocked to the yen like a bunch of trick-or-treatin’ kids to a sugarhouse last Friday on increasing concerns over global economic growth. USD/JPY got closer to the psychological 80.0 handle after it staged a 57-pip drop at 80.47. Meanwhile, EUR/JPY plunged by 87 pips at 112.00.

The annualized housing starts for September showed a 17.7% growth, which was a bit cooler than its 20.5% growth in August. The lack of fireworks highlighted the Japanese economy’s struggle with low demand and strong currency. In fact, word on the forex streets is that companies are starting to adjust their balance sheets to soften the impact of the strong yen.

Will the yen continue to climb the charts this week? We’ll know more about the state of Japan’s economy when the average cash earnings report is released today at 1:30 am GMT. The figure is estimated to clock in a 0.5% growth in September, but lower figure just might attract more currency bears in the Land of the Rising Sun.

The Bank of Japan’s monetary policy meeting minutes will also be released today at 11:50 pm GMT. The report could show the details on why the BOJ voted to keep its interest rates rock bottom at 0%-0.10%, so keep your eyes glued to the tube!

But if you miss the meeting minutes because you were too busy playing Angry Birds, then this is your lucky week! No other major report is scheduled for release until Friday when the BOJ takes the spotlight again with its interest rate announcement and press conference. Hmm, are we in for more surprises from the BOJ?

Be sure to catch all the drama, folks!

357

The yen started the week with a bang yesterday when it dropped sharply against its counterparts in a matter of seconds during the early Asian trading session. The yen gained 27 pips on the euro at 111.86, but lost 20 pips on the dollar at 80.51 after pulling a fast one on the markets with its spike to 130.37.

Whether it was a Bank of Japan intervention, a mistaken order, or a large purchase of a firm, the yen bulls were able to erase all the spike’s gains by the European session. Hmm, is it because Japan also posted a better-than-expected economic report? The average cash earnings in September showed a 0.9% growth after rising by 0.4% in August.

No economic report is scheduled for release today, but watch for the other big-impact reports coming out of the other economies!

358

Dude, where did the yen’s mojo go? Yesterday the Asian currency lost against most of its major counterparts with USD/JPY closing 12 pips higher at 80.63 and EUR/JPY hustling to a high of 113.48 before ending the day at 113.15, punching a 130-pip loss for the yen. Ouch!

Word on the street is that the safe haven currency lost its charm during yesterday’s trading thanks to the comeback of risk appetite spurred by positive economic reports the world over. So with that said, you may want to gauge the market’s sentiment before you bet your pips on the yen as our economic calendar shows that we won’t be hearing any economic reports from Japan today.

Take note also that the minutes of the FOMC meeting is due tomorrow. So you might want to keep that in mind as we might see a round of profit-taking before the release. That’s just a hunch though. Good luck!

359

And that’s three for three! The yen scored its third straight loss against the dollar on Wednesday as USD/JPY peaked at 81.59 before closing 44 pips higher at 81.07. Ouch!

The Asian currency was the sole loser among the majors in yesterday’s trading but our economic calendar shows that we didn’t have any report that could’ve weighed it down. So, what kept the yen in the bear lair despite the dollar’s weakness?

Word on the street is that it might have been because a handful of our homies in the FX hood are worried about another intervention from the BOJ. Some naysayers think that we may not see much swagger from the yen until after the central bank officials’ get-together on November 5 when they announce their interest rate decision.

I ain’t no foo and I know that the chances of an interest hike are slim. But I think we need to keep an ear out for what BOJ Governor Shirakawa has to say tomorrow at 12:00 am GMT. Who knows, his words may just launch bombs on the charts when he details how the BOJ will go about its 5-trillion yen asset buying scheme.

360

Move over you low-yielding currency! Risk appetite is back with a vengeance! Without any economic reports from Japan yesterday, the yen was forced to dance to the tune of risk appetite after the Fed’s announcement of its 600-billion USD QE program.

Even though USD/JPY fell by 34 pips to 80.74, EUR/JPY rocketed to an intraday high of 115.42 and GBP/JPY closed 97 pips higher at 131.35.

Today traders are gonna watch for the BOJ interest rate decision and press conference. Word on the forex street is that the BOJ will just give more 411 on its purchases of real estate investment trusts and exchange-traded funds since the yen’s gains on the dollar isn’t as crazy as expected.

But keep your eyes glued to the tube for any surprises, aight? I hear the big NFP report is due in the U.S. today at 12:30 pm GMT!

361

The Japanese yen was a big loser last Friday as the U.S. dollar, Australian dollar, and British pound ganged up and beat it up. The only currency that was worse off was the euro since EUR/JPY slid from its 114.70 open price to close at 114.02.

Traders still seem reluctant to buy up the yen, and I can think of two fundamental reasons for this. One is that the threat of intervention is still present and the central bank is likely to step in the currency market again if USD/JPY makes a new low. Another is that the BOJ just gave the details of their planned asset purchase program, and revealed that they’re looking to buy government bonds next week and exchange-traded funds next month.

Will this anti-yen bias carry on this week? The economic calendar shows that it could be a busy week for Japan. Today, the BOJ monthly report and Japan’s leading index is due. Both reports are expected to be on the dovish end, with the leading index estimated to show a downtick from 99.5% to 99.4% in September. Watch out for those reports due 5:00 am GMT.

Later on, the current account balance will be reported at 11:50 pm GMT. The current account surplus is expected to widen from 1.18 trillion JPY to 1.23 trillion JPY, but if the actual figure disappoints, it could accelerate yen-selling.

On Tuesday, Japan will release its Economy Watchers sentiment reading and also the and preliminary machine tool orders report. Both releases are expected to have minimal impact on the yen, but it’d help to take note of the actual results just as well.

Keep an eye out for the core machinery orders due Wednesday 11:50 pm GMT. After jumping by 10.1% in July, core machinery orders are expected to slip by 9.2% in October. Yikes! If the actual figure does print a nasty fall, the yen might be in for one too!

362

The Japanese yen fought back yesterday, struggling to regain some of its losses against its counterparts. It made the most gains against the euro and the pound, as EUR/JPY fell to a low of 112.65 while GBP/JPY closed at 130.94.

Japan’s current account came in better than expected, showing that the surplus widened from 1.18 trillion JPY to 1.66 trillion JPY in September. Components of the figure show that the larger surplus was spurred by a jump in Japan’s exports to its Asian neighbors. This shows that, even if the Japanese yen has been appreciating lately, demand for Japanese products still remains strong. Does this mean that the BOJ will keep their paws off the currency markets then? We’ll just have to wait and see!

Keep your eyes and ears peeled for the release of the Economy Watchers sentiment reading for October and the preliminary machine tool orders data. The sentiment index is expected to improve from 41.2 to 41.7 during the month, suggesting that respondents are slightly less pessimistic with their outlook for consumer spending. Meanwhile, the machinery orders report could post another increase after the 112.9% annualized rise seen previously. Stay tuned for those reports due starting 5:00 am GMT.

363

Not today, ol’ buddy! The currency bulls didn’t care much for the yen yesterday despite the bout of risk aversion in the markets. Hmm, was this because Japan released worse-than-expected reports? Even though EUR/JPY lost 26 pips, USD/JPY gained by 65 pips at 81.83, and GBP/JPY ended the day 40 pips higher at 130.93.

The economic watchers’ sentiment report might have dampened the bulls’ party when it only printed at 40.2 in October, which was less than September’s 41.2 figure and the expected 41.7 number.

Japan’s preliminary machine tool orders also didn’t help when it only showed a growth of 70.9% in October after rising by 113.6% in September.

Maybe the yen could gain back the pip-lovin’ today when the household confidence report is released at 5:00 am GMT. The big core machinery orders will follow suit at 11:50 pm GMT, and a figure lower than the expected 9.2% drop could spell trouble for the yen bulls since it implies weakening growth in manufacturing.

Lastly, the change in the prices of goods sold by corporations is due today at 11:50 pm GMT. Market geeks are seeing a 0.1% dip like last September, but a higher number could boost the yen up the charts.

Happy trading, kiddos!

364

Oops – it did it again! The yen fell against the dollar for the second day in a row after the worse-than-expected household confidence report in Japan made it easier for the currency bulls to jump into the dollar ship. USD/JPY rose to an intraday high of 82.80 before closing 49 pips higher than its open price at 82.32. Meanwhile, EUR/JPY also surged 62 pips higher at 113.42.

Japan’s consumer confidence fell for the 4th month in a row at 40.9. Apparently, consumers are still concerned about job security and their wages, while businesses are skittish on the rapidly appreciating yen.

Speaking of business concerns, Japan’s core machinery orders report released a few dumb bell reps ago revealed a 10.3% drop, its first decline in four months. As my market spies informed me, the disappointing figure was caused by the companies’ lack of enthusiasm to spend on a weakening economic recovery. Uh-oh.

Good thing the price of goods sold by corporations also released moments ago gave Japan’s disappointment a breather when it showed a 0.9% gain in October, an improvement from September’s 0.1% decline.

No other report from Japan will stir up the markets today as the world turns its head to the big G20 meeting in Korea, but keep close tabs on any reports that might interest the yen bulls and bears!

365

Don’t worry if you weren’t able to trade USD/JPY yesterday. You didn’t miss out on much. Action on the pair was flat for the most part, probably because neither Japan nor the U.S. released economic data. Still, when all was said and done, the yen emerged weaker for the day as USD/JPY rose 18 pips to land at 82.50.

China, which is Japan’s largest trading partner, released a handful of reports that were pretty much in line with forecasts. Retail sales showed a healthy 18.6% year-on-year growth, though slightly lower than expected. Likewise, industrial production growth showed a 13.1% uptick, which is respectable but lower than anticipated.

It’s important to keep tabs on China because its close ties with Japan means that any signs of an economic slowdown could negatively impact Japan as well.

Nothing more to see from Japan today. But the ongoing G-20 meeting in South Korea may just cause some unexpected moves in the markets, so stay on your toes.

366

Try again next time, ol’ buddy! Despite the lack of economic reports from Japan, the currency bears feasted on the yen last Friday and pushed the yen lower against its major counterparts. USD/JPY cut its losses to only 6 pips at 82.44 after plunging to its intraday low of 81.65, while EUR/JPY ended the day 20 pips higher at 112.88.

Will the bulls finally give the yen some attention this week? The GDP report released yesterday printed a 0.9% growth for the third quarter, up from the 0.4% rise in the second quarter. The increase was credited to the consumers stepping up their spending in the last few months. Traders have to be careful though, as some naysayers are stating that the impact of the strong yen and the expiration of the government’s stimulus are yet to be felt in the next months.

There will only be a few reports on the docket this week to test the naysayers’ statements. The revised monthly industrial production is due today at 4:30 am GMT. The revised figure is expected to mirror the actual 1.9% decrease of the preliminary number for September.

Meanwhile, the total value of services purchased by businesses is expected today at 11:50 pm GMT. The data is expected to decrease by another 0.6% after slipping by 0.2% last August, but a lower number might mean that businesses aren’t as excited over the economy as they were in the previous months.

The next report for the week isn’t until Friday when the index of all industrial activity is released at 4:30 am GMT. The report is expected to clock in a 0.6% decline in September, but a lower figure just might prolong the currency bears’ party in Japan.

Stay sharp, forex geeks!

367

“[I]Zutto tsuzukete![/I]”, encouraged the yen bears yesterday as they continued to push the yen lower against its major counterparts. A bleaker setting in the euro zone pushed EUR/JPY 15 pips lower at 112.89, but USD/JPY posted a 70-pip gain at 83.19 while GBP/JPY rose 45 pips at 113.49.

It seemed that traders aren’t buying Japan’s positive GDP figures posted early this week. The report showed that the Japanese economy grew by 0.9% in the third quarter. While the number exceeded the expected 0.6% growth, many worrywarts are saying that the figure is puffed up by the expiration of a subsidy of cars and other gizmos.

They also said that the third quarter increase is a temporary one, and that the effects of weakening exports and consumption are yet to show up in the fourth quarter GDP figures. Uh-oh.

It also didn’t help the yen that value of services purchased by businesses slipped by 0.9% in September as companies continue to worry about the Japanese economy. This offset the uptick revision of the industrial production report to -1.6% from -1.9% in September, and sent the currency bulls scurrying to the yen counterparts.

No report is on tap over the Land of the Rising Sun today, but keep your eyes peeled for any reports that might affect yen trading!