Daily Economic Commentary: Japan

Trading Discussion News and Economy
415

Attaboy, brotha! The yen clobbered its major counterparts yesterday on a bit of anti-dollar sentiment in markets. USD/JPY sailed down by 59 pips to 82.05, while GBP/JPY fell to 131.15. Meanwhile, EUR/JPY closed 8 pips lower than its open price after peaking at an intraday high of 111.06.

The possibility of China loosening up on its currency policies after the meeting of US President Obama and China’s Premier Hu reduced the demand for the Greenback and boosted the appetite for Asian currencies. Of course, it also doesn’t hurt that last Tuesday’s better-than-expected economic reports in Japan probably weren’t priced in yet. Recall that the yen actually slipped against the euro and the pound last Tuesday.

No economic report is scheduled for release today, but keep your eyes on risk appetite across the seas. A wave of risk aversion might hit the pip streets, and boost the yen further up the charts!

416

If you were watching yen action yesterday, you probably felt like it was a video game, as the yen got stomped on like a Koopa! USD/JPY rose nearly 100 pips, closing at 83.01, while EUR/JPY gained 130 pips to finish at 111.85.

With no data coming out from Japan yesterday, what gives?

The first may be the news that China may be raising rates soon to counter rising inflation. With China being Japan’s biggest trade partner, any moves that could slow down Chinese growth could adversely affect Japan, and in turn, the yen.

The second reason might be broad based dollar strength. With USD/JPY surging up the charts, this could have led to the yen losing against its other counterparts.

With a slew of red flags coming out from Europe later today, will risk appetite lead to more yen losses? Or will the yen bulls recuperate before the end of the week?

417

Yen trading was as mixed as a dynamite roll last Friday, as it posted gains versus the USD and com-dolls, but struggled against its European counterparts. USD/JPY fell 44 pips to close at 82.57, while EUR/JPY managed to gain 57 pips and finish at 112.57.

The yen’s movement was probably a reaction to sentiment towards other currencies, as no major data was released on Friday.

Take note that things could change later this week, as we’ve got a slew of economic data coming out this week from Japan.

First up, the Bank of Japan will be making its monetary policy statement tomorrow. While no drastic changes (a.k.a interest rate hike) are expected, look out for a more optimistic tone from Governor Shirakawa and his samurai central bankers. Take note that the BOJ has recently lifted its economic expectations, so we could hear a more optimistic tone.

On Wednesday, trade balance figures are scheduled for release. Word is that 530 billion JPY is the magic surplus figure that economic geeks are expecting. This would indicate that exports are picking up despite the persistent rise of the yen.

On Thursday, we’ve got the whole sushi platter on display, with household spending, CPI, and retail sales figure all on deck. Will these figures disappoint? Or will they support the notion that Japan’s economy is heating up?

418

Despite the lack of economic reports from Japan, the yen’s price action was as mixed as the shirt colors of the crowd in the Green Bay Packers-Chicago Bears match. The yen lost a few pips to the euro, but gained 18 pips on the scrilla and 17 pips on the pound.

Japan will make up for the lack of reports yesterday with its big-hitters coming up today. The Bank of Japan is set to release its interest rate decision today at 11:00 pm GMT. Although no change in interest rates is expected from the BOJ, traders will likely tune in to hear its sentiments on Japan’s economy.

Then, at 11:50 pm GMT we’ll also get hold of the change in the price of services purchased by corporations in Japan. Employment is one of the weak spots in the Japanese economy, so a number lower than the 1.1% decline in November might attract the yen bears.

Don’t miss out on all the pip opportunities today, kids!

419

Hi-yah! After behaving in markets for the past couple of days, the yen went all ninja on its major counterparts yesterday. Upbeat economic reports from the BOJ and a bit of risk aversion in markets pushed USD/JPY 24 pips lower at 82.25 and GBP/JPY 185 pips down at 130.13. Boo yeah!

While the BOJ kept its interest rates between zero and 0.1%, it also upgraded its economic growth forecasts from 2.1% to 3.3%, citing rising prices and improving export demand. Of course, it also helped that markets lost a little pip-love on a bit of risk aversion.

Will the yen’s rally gain momentum today? The BOJ monthly report at 5:00 am GMT is expected to show the data that the BOJ used to make its decisions, so a bit of optimism is expected.

Then, at 11:50 pm GMT the trade balance report will be released. Market geeks expect the trade surplus to inch up to 0.53 trillion JPY in December, but a higher number could attract more currency bulls.

Good luck in your trades today!

420

The yen has nothing to be ashamed of with its performance yesterday. It held on tight and gave up a good fight against its American and European counterparts, but it just couldn’t help but slip a little bit! After a hard-fought battle, USD/JPY ticked 5 pips higher and closed at 82.30 while EUR/JPY rose 8 pips and landed at 112.66.

Yesterday’s lone release, the BOJ monthly report, offered nothing new to investors. The BOJ is basically sticking to its previous assessment of the economy. I guess this could explain why the yen didn’t move much yesterday.

But just a couple of hours ago, Japan printed out its latest trade balance data, and…. (drum roll, please!)… it was awesome!

Japan’s trade surplus grew from 540 billion JPY to 710 billion JPY in December, blasting right through forecasts for 530 billion JPY. The best thing about it is that December witnessed a strong 13.0% year-on-year rise in exports. If you recall, the BOJ has been quite concerned about exports because it accounts for a huge part of Japan’s GDP and has recently been threatened by the yen’s appreciation.

Can Japan follow up this positive figure with more good news today?

Later tonight, Japan will be rolling out some noteworthy releases that you ought to catch.

At 11:30 pm GMT, we’ll take a look at household spending data, which is anticipated to reveal a 0.5% decline following November’s 0.4% drop.

Also, we have the national core CPI due. Expect to see consumer prices tick down by another 0.4% in January after December’s 0.5% fall.

At the same time, the unemployment rate will be published, though most expect it to stay steady at 5.1%.

Then at 11:50 pm GMT, Japan takes it up a notch with its latest monetary policy meeting minutes. What’s it gonna be this time? Dovish or hawkish?

We also have retail sales data on deck. Forecasts are for a 0.6% rise in retail sales in December, down from 1.5% in November.

With so many releases due today, the yen could be in for some wild moves. Don’t miss out!

421

Now that’s what I’m talking about! The yen came back with a vengeance against its major counterparts last Friday when a burst of risk aversion sent the traders flocking to the low-yielding currencies. Despite the gloomy economic reports from Japan, USD/JPY plunged by 73 pips to 82.14 and EUR/JPY plummeted 206 pips from its open price at 111.77.

No economic report was released from Japan last Friday, but concerns on the escalating violence reports in Egypt kept investors from buying high-yielding currencies. Egypt might not be one of the hotshots in oil production, but its Suez Canal plays an important role in oil transportation. A delay in oil transport could increase its prices, which could make central banks more concerned on their inflation levels.

Let’s see if fundamentals could take the spotlight from risk sentiment today. A few dumb bell reps ago Japan’s manufacturing PMI clocked in at 51.4, which is higher than December’s 48.3 number. Meanwhile, its preliminary industrial production figures for December also printed to the upside at 3.1% after showing a 1.0% growth in November.

Only the housing starts figures at 5:00 am GMT will be released today, so keep your eyes on the risk sentiment in markets, will ya? A round of risk appetite might take the yen back by a few pips against its high-yielding counterparts.

422

Whoops! The yen was slipped like it was on mudslide against its pip buddies yesterday despite a better-than-expected economic report from the Land of the Rising Sun. USD/JPY inched up by 8 pips to 82.08, and GBP/JPY rose by 158 pips to 131.47. Meanwhile, EUR/JPY also climbed 93 pips higher than its open price at 112.36.

Japan’s positive reading in its housing starts report added to the green figures already in the country’s arsenal at the start of the week. The data printed a 7.5% growth in December, which is better than the 6.8% growth in November.

Too bad for the yen that risk aversion in markets have eased a little. Because violence in Egypt hasn’t escalated as markets feared, investors got in the mood to sell the low-yielding yen and buy the high-yielding currencies.

Will the average cash earnings report at 1:30 am GMT be any help for the yen? The data clocked in a 0.2% rise in November, but a higher growth in December could signal that employment conditions are improving in Japan.

423

The yen had its ups and downs yesterday as it chalked up different results in light of yesterday’s improvement in risk appetite. While it weakened against most of the higher-yielding currencies, it had its way with the dollar. EUR/JPY rose 16 pips to 112.53 while USD/JPY fell 72 pips to 81.36.

With risk appetite back in play, it wasn’t too surprising to find the yen weaker against “riskier” currencies. The yen selloff might have also been helped by an unexpected drop in average cash earnings. According to December’s stats, the employment income of workers dropped 0.4%, instead of rising 0.9% as expected. Ouch. Could this be the a sign of a deteriorating labor market?

There’s nothing more to see from Japan today. But make sure you monitor risk sentiment. If appetite continues to improve, then the yen could be set to take on more losses against higher-yielding currencies.

424

The performance of yen pairs yesterday was as mixed as a bag of M&Ms. The yen strengthened against the U.S. dollar and the euro but had to bow down to the pound. Will it find a clearer direction today?

Since Japan didn’t release any economic reports yesterday, its currency was left at the mercy of risk sentiment. Good thing that risk aversion was on the yen’s side as riots in Egypt got worse and revived concerns about another oil crisis.

Japan won’t be releasing any economic reports again today so yen pairs might be driven by risk sentiment again. Keep your eyes and ears peeled for any updates on the situation in Egypt to see whether the risk aversion switch is still on for today.

425

Ka-ching! The yen bagged a few easy pips yesterday when it gained against its pip pals despite the lack of report in Japan. Risk aversion in markets helped boost the yen, with EUR/JPY dropping by 138 pips to 111.22, an GBP/JPY plunging by 126 pips to 131.70. Meanwhile, the Greenback managed to sneak in 4 pips at 81.58 after reaching an intraday high of 82.07.

No reports are scheduled from Japan again today, but keep close tabs on the big NFP report in the U.S. at 1:30 pm GMT! USD/JPY is usually a good gauge of dollar sentiment since both currencies are low-yielding in nature and fundamentals plays a bigger part in the pair’s price action.

Good luck in your trades today!

426

WEEEEAK SAAAAUCE! No two words can describe the yen’s performance better! It weakened against almost all of its major counterparts last Friday, with USD/JPY rising 62 pips to 82.20 and EUR/JPY climbing 48 pips to 111.70.

The Japanese press was on stealth mode last Friday, giving yen traders no data to trade. Let’s see if they’ll make some noise this week!

The main event to watch out for today is BOJ Governor Shirakawa’s speech at 3:30 am GMT. You know how policymakers love to drop clues about future policy moves, so be sure to listen closely to what he has to say. Japan’s economy hasn’t exactly been looking to sharp lately, with consumer spending just crawling by, so he might provide more insight on the situation.

We also have a set of tier 3 reports due today. The leading indicators report is due at 5:00 am GMT while bank lending, current account, and M2 money stock data are due at 11:50 pm GMT. Though individually, these releases may not have much impact on the yen, they may be able to get a reaction from the market if they all print similar results.

The reports to keep an eye out for this week are the economy watchers sentiment report and the core machinery orders report.

The economy watchers sentiment report, which is scheduled for release tomorrow at 5:00 am GMT, is expected to upgrade its reading from 45.1 to 45.6 in January. This report basically gauges consumer confidence and gives us an insight on possible future consumer spending.

Then at 11:50 pm GMT on Wednesday, core machinery orders data will be available. As a leading indicator of production, a strong reading from this report could provide the yen with a boost. Expect to see November’s 3.0% decline improve drastically to a 5.2% increase.

Now that you know what you need to know for the week ahead, go out there and make some pips!

427

YEEOUCH! The yen was at the bottom of the food chain yesterday as it was preyed on by all of its major counterparts. Though its losses were limited, they were also broad-based. USD/JPY rose 13 pips to 82.31 while EUR/JPY climbed 35 pips to finish at 111.82.

If you had listened intently to BOJ Governor Shirakawa yesterday, then you would know that there is a possibility that the BOJ may step up its asset purchases if the economy doesn’t pick up soon. Basically, the central bank is saying that it will be ready and willing to act depending on how the economy performs.

In other news, just a few hours ago, Japan unloaded a set of tier 3 reports that failed to get a reaction from the market. Bank lending was down 1.8% year-on-year, the current account pretty much matched expectations at 1.56 trillion yen, and the M2 money stock grew 2.3% just as expected.

Perhaps we’ll get a bit more action when the economy watchers sentiment report comes out later at 5:00 am GMT. The report is expected to upgrade its reading from 45.1 to 45.6 in January. Though such a reading still lies under the “pessimistic” range, it still marks a significant improvement. Who knows, we may even see an upside surprise!

428

The yen got a bear hug from traders during yesterday’s trading. Aww, ain’t that sweet? It reached a high of 81.77 against the dollar only to lose it all during the New York session, closing the day with a 4-pip loss at 82.35. Meanwhile, EUR/JPY ended the day 45 pips higher at 112.27.

I’m guessing that the improved market sentiment made the yen’s higher-yielding counterparts more loveable than it. The dollar, on the other hand, had sweet, relatively optimistic words from some Fed members to back it up.

Perhaps the not-so-stellar lineup of economic reports yesterday also kept the yen from rallying.

We saw that bank lending in Japan continued to fall for the 14th consecutive month. The report for January printed at -1.8% following the -2.0% reading we saw in December.

The Economy Watchers’ Sentiment index which printed at 44.3 and disappointed the 45.6 figure that the market was eyeing, might have also been bearish for the yen, offsetting the positive vibes that might have come with the current account report.

The Ministry of Finance reported yesterday that foreign demand for the yen increased by 1.56 trillion JPY in December from 1.15 trillion JPY in November. Analysts had only predicted the account surplus to be at 1.55 trillion JPY.

Let’s see if the consumer confidence report due later today will be enough to help for the yen to pare its losses.

At 5:00 am GMT, the household confidence survey for January will be on tap and it is anticipated to post a modest improvement to 40.5 from 40.1 in December. Watch out for a better-than-expected figure as this could be bullish for the yen!

While you’re at it, you may also want to gauge market sentiment. Remember that the currency usually rallies in times of risk aversion. Good luck!

429

IGNORED! Yen traders didn’t seem to pay any mind to the couple of green figures that Japan released early in the day. In spite of positive economic data, USD/JPY finished hardly unchanged at 82.37.
Household confidence surprisingly picked up strongly last month, as the index doubled the expected increase and rose from 40.1 to 41.1. Keep in mind, the last time Japan recorded a rise in confidence was back in June 2010.

We also learned that machine tool orders picked up 89.4% year-on-year last month, up from 64.0% in December. Hmm… Not a bad way to start the year, don’t you think? If this keeps up, talks of additional stimulus may soon vanish.

Unfortunately, the string of good news came to an end a couple hours ago. Japan posted a disappointing core machinery orders figure. Machinery orders rose 1.7% in December, which is only a third of the growth that was forecasted. Still, this news isn’t entirely bad. It still marks the first increase in four months, and we’re also seeing signs of improving corporate earnings and business investment. There is hope!

The rest of the day will be quiet in Japan. In the meantime, monitor risk sentiment and any developments in the U.S. as they may determine USD/JPY’s destination for today. Good luck!

431

Geronimooooo! The yen fell fast and hard yesterday as it failed to get a boost from the only report released. It recorded its biggest loss against the dollar as USD/JPY climbed 107 pips and closed at 83.30.

It could be said that the day didn’t start out well for the yen. Within the first few hours of the day, we learned that core machinery orders only rose 1.7% in December, just a third of the expected growth!

I suppose the simultaneous release of the CGPI, which measures the increase in price of goods sold by corporations, was able to counter the bad news a bit. CGPI recorded a 1.6% rise in prices, better than the forecasted 1.4% rise. With Japan constantly battling deflation, such an uptick is definitely welcome.

That’s all we’re getting from Japan this week… Japan’s off to an early weekend! It’s celebrating National Foundation Day today, so we may be in for low liquidity during the Tokyo session. That means be extra careful! Volatility can be pretty unpredictable in low liquidity situations.

432

The yen’s moves on the charts were limited during Friday’s trading as Japanese bankers took a break to chug on some sake in celebration of National Foundation Day. USD/JPY ended the week at 83.46 after opening at 83.30 while EUR/JPY ended the day 17 pips lower at 113.06.

I wonder how market junkies will react to Japan’s GDP report when they get back to their desks today.

Earlier, it was reported that the economy contracted by 0.3% in the fourth quarter of 2010. The good news is that it was better than what analysts were expecting which was for a 0.5% contraction. The bad news is… well, the economy shrank!

Making it even worse is that the growth we saw in the third quarter of the year, which was initially reported at 0.9%, was revised down to 0.8%. Yikes!

With this, I guess it’s safe to say that the chances of the BOJ hollering an interest rate hike tomorrow in its monetary policy statement are as low as Forexgump becoming the next American Idol. And let me tell you, that guy just can’t sing at all! No offense bud!

Nonetheless, make sure you still stay tuned to the BOJ’s statement tomorrow because BOJ Governor Shirakawa may just say something that could affect the yen’s fate on the charts. Kapiche?

433

Yen pairs’ performance was as mixed as the reactions to the Grammy winners. The yen strengthened against the euro, ranged against the Greenback, and weakened against the pound yesterday. How will it behave today?

Today is a big day for the yen since the BOJ is gearing up to release its monetary policy decision later on. Of course, policymakers are expected to keep rates on hold as usual but make sure you stay tuned for the accompanying statement and the BOJ press conference. Hawkish comments could be bullish for the yen while dovish ones could force the yen to give way to its major counterparts.

Also due today is the tertiary activity index, which is slated to post a 0.5% dip. This index measures the change in value of services purchased by businesses and, as such, it serves as an indicator of economic health. Stay tuned for the actual figure due 11:50 pm GMT.

434

Ouch! The yen took a nasty beating from most of its major counterparts, especially from the pound. GBP/JPY flew by almost 200 pips from its 133.57 open price while USD/JPY came close to the 84.00 handle. Will the yen have a chance to make a comeback today?

Even though the BOJ upgraded their growth forecasts for the Japan, their upbeat outlook for the economy wasn’t enough to provide support for the yen. Not even their industrial production report, which printed a 3.3% increase for November, was able to keep the yen from dropping.

The bleak performance of the yen was probably due to the weak tertiary industry activity index, which printed a 0.8% decline for December. This was a few notches worse than the projected 0.5% dip.

Up ahead, Japan doesn’t have any major reports on deck. Still, keep an eye out for the BOJ monthly report, which could shed more light on the central bank’s future monetary policy stance.

435

Boy did the yen have lady luck on its side during yesterday’s trading! Despite positive reports from the Fed, it still managed to snatch a 21-pip win against the dollar when USD/JPY settled at 83.16.

It was also able to bag 57 pips from the pound when U.K.'s employment reports came in worse-than-expected and BOE Governor Mervyn King sounded more dovish than expected.

Traders think that its win against the Greenback was quite bizarre though. Note that the pair usually moves alongside bond yields. But yesterday, it didn’t. So if you’re thinking about rooting for the yen, you may want to be extra careful because a few market junkies expect USD/JPY to align with yields soon.

Also, on the economic front, we have the final leading indicators report at 5:00 am GMT. A figure better than its previous 101.4 reading will probably be bullish for the yen, so keep your fingers crossed for that!