Daily Economic Commentary: Japan

Trading Discussion News and Economy
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The yen sure looked like a rockstar in yesterday’s trading as it got groupies of bulls extending its winning streak against the dollar when it closed at 78.91 with a 70-pip win. Boo yeah!

Aside from repatriation flows, it might have also helped that the Tertiary Industry Activity Index for January erased its 0.9% decline in December when it came in at 2.1% and overshot the 1.5% forecast.

But it looks like the yen’s days in the limelight are over… for now. Earlier today, the Asian currency got sold off across the board when on news about the G7 agreeing to conduct a joint intervention to keep it from rising. Nooooo!

So be careful betting your pips on yen pairs, ayt? Get a feel of market sentiment to see if yen bulls will be able to tip the momentum back in their favor or not.

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True love may be forever, but gains in the forex market are as temporary as footprints in the sand. After five whole days of rallying, the yen finally found itself on the back foot of other major currencies as the news of a joint currency intervention from the G-7 hit the airwaves. USD/JPY, from its opening price of 78.90, surged more than 150 pips to end the day at 80.60.

This week, the only reports due are the Trade Balance (Wednesday, 11:50 pm GMT) and the Tokyo Consumer Price Index (Friday, 11:50 pm GMT). The market expects the trade balance to show a surplus of 680 billion JPY and the Tokyo CPI to print a -0.3% figure. You need not worry too much about these reports, as they tend to have very little effect on price action.

Also, do note Japanese banks will be holiday today, so expect liquidity to be thin during the Asian session. Good luck with your trading this week folks!

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The yen must’ve joined the Japanese in celebrating the bank holiday because it was missing in action yesterday! It basically allowed all of its major counterparts to take control of the charts! USD/JPY closed at 81.03 after gapping up from last week’s close of 80.60 while EUR/JPY finished at 115.26 after gapping up from 114.31.

So far, it seems the G7’s vow to keep the Japanese currency grounded has been doing the trick! Only time will really tell where the yen is headed, but if we see a repeat of what happened back in 1995, the yen may actually continue heading higher. Still, there are many that believe the yen has already topped out.

We don’t have any potential market-moving reports comin’ out from Japan today, but be sure to check news channels from time to time. Any new developments in Japan, especially about the nuclear radiation situation, may shift risk sentiment and spur the yen higher again.

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Action on USD/JPY was as tight as Pip Ninja’s skinny jeans during yesterday’s trading. The pair moved within a 45-pip range before it ended the day six pips lower from its opening price at 80.97.

I have a feeling Finance Minister Noda’s remarks about the G7 joint intervention last week might have limited the yen’s moves. According to him, his homies from other countries still have their eyes on the yen and that they would “cooperate in an appropriate manner.”

Err, I don’t know about you, but that it seems like he’s hinting more interventions in the future.

On top of that, rumors about the BOJ considering further easing measures might have also weighed on the yen. The details are still unclear though, so I guess we’ll just have to tune in to the bank’s meeting on April 6 to 7.

With no reports scheduled to be released from Japan today, the yen’s fate on the charts will probably be dictated by market sentiment. Keep in mind that the currency usually rallies in times of risk aversion. Good luck!

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Ooh lala! Candlesticks on the daily time frame of USD/JPY are beginning to look like cake pops! The pair formed its third spinning top in a row as it consolidated around the 81.00 handle throughout yesterday’s trading before finally closing 5 pips lower from its opening price at 80.92.

What limited the yen’s moves this time?

I have a feeling it might have been the Cabinet Office’s economic report. According to the government’s calculations, the damage of the earthquake costs a whopping 25 trillion JPY. Ooouch! Officials haven’t estimated the calamity’s effect on GDP yet, but naysayers are worried that the hefty bill may take a big toll on economic growth.

The yen’s strength is probably not helping Japan’s recovery any easier either. The trade balance report for February showed that exports outpaced imports by only 560 billion JPY and disappointed the forecast which was for a 680 billion JPY trade surplus. So don’t be surprised if the BOJ starts talking about the yen being too strong especially now that risk aversion could make traders attracted to the currency’s safe haven status.

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All of y’all who stayed out of the markets last week to avoid the wild swings on the yen may want to consider jumping back in now. It seems the markets have finally stabilized! The yen looked very tame on the charts yesterday as USD/JPY stayed within a tight range and closed just 7 pips above its opening price at 80.98.

Its trade balance report, released early yesterday morning, did nothing to budge the yen. According to February’s stats, Japan’s trade surplus expanded from 270 billion JPY to just 560 billion JPY, instead of to 680 billion JPY as predictions had it.

Even though exports recorded a 9.0% rise year-on-year last month, the outlook doesn’t seem bright for the industry. There are considerable downside risks involved in the coming months in light of the earthquake and tsunami that hit Japan earlier this month.

In other news, it was confirmed earlier today that Japan’s deflation woes haven’t disappeared. Its core CPI matched forecasts by showing a 0.3% drop in prices in March. But something tells me it may come under increasing inflationary pressure in the coming months. As Japan imports materials to rebuild its damaged infrastructure, it may feel the impact of rising prices abroad.

That’s it for this week’s economic data, but do keep tabs on risk sentiment and USD/JPY! The pair has been consolidating all week and it might just be waiting for risk sentiment to shift before it busts a move again!

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The yen’s scorecard for Friday’s trading was as mixed as movie reviews for Zack Snyder’s Suckerpunch. It was able to roundhouse-kick the euro from its intraday high of 115.23 to close the week at 114.62. But it lost against the comdolls and the dollar with USD/JPY ending Friday 37 pips higher from its opening price at 81.35.

I have a feeling that the negative reading that we saw from Japan’s CPI report weighed on the yen’s bout against its counterparts.

On Friday it was reported that inflation pressures were still absent in the economy in February. The CPI reports for Tokyo and the overall nation came in as expected at -0.3%. (Note that these did not for account the impact of the earthquake and tsunami.) However, some economic gurus are confident that rising food and energy prices will help Japan defeat deflation possibly by the end of this year.

I don’t know if it’s just me, but it seems like the market has moved on from talks of repatriation flows. With that said, you may want to be on your toes for the economic reports from Japan due this week as they would probably determine the yen’s fate on the charts.

Later at 11:30 pm GMT, we’ll have the household spending report for February which is expected to come in at 0.1% and erase the decline it posted in January. Along with that will also be the unemployment rate and the retail sales report for the same month. Analysts aren’t keeping their hopes up though. The rate of joblessness is anticipated to have remained steady at 4.9% while consumer spending is seen to print a 0.4% decline.

Come Wednesday, at 12:50 am GMT, we’ll have the preliminary industrial production report for February. Take note that January’s reading was revised down to 1.3% after being initially reported at 2.4%. So you may want to brace yourself because the actual reading could disappoint the 0.0% forecast.

I wouldn’t keep my hopes up for the manufacturing PMI either which is due on Thursday at 12:00 am GMT. The figure will account the effects of the calamities that hit Japan, so we may see the figure come in lower than the 52.9 reading it posted in February. Also on tap on Thursday will be the average cash earnings report for February which is expected to print a 0.3% uptick for the month.

Lastly, we’ll end the week with the Tankan Manufacturing index for the first quarter of 2011. The much-anticipated report, which is scheduled to be released on Thursday at 12:50 pm GMT, has been predicted to show that large manufacturers see improving business conditions with the index eyed at 6.0, higher than its 5.0 reading for the fourth quarter of 2010.

And it seems like it’s not just the manufacturers who are giddy! The Tankan Non-Manufacturing index is also anticipated to reflect improving conditions with the forecast higher at 2.0 than the 1.0 figure we saw in January.

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Yen? Yen who? The Asian currency seemed missing in action during yesterday’s trading as it got sold off against its major counterparts. USD/JPY ended the day 30 pips higher at 81.72 while EUR/JPY closed 98 pips higher at 115.17.

Some economic gurus say that perhaps Japan’s weak fundamentals are finally catching up on the yen now that talks of repatriation flows have already become old news for the market.

I have a feeling that the worse-than-expected household spending report for February also weighed down the Asian currency. According to the data released yesterday, expenditures by consumers declined by 0.2% during the month and disappointed the 0.1% uptick that the market was expecting.

On the bright side though, the unemployment rate came in lower at 4.6% than the consensus and its previous reading of 4.9%. At the same time, retail sales in February were 0.1% higher than they were a year before which also topped the forecast which was for 0.4% decline.

See if the preliminary industrial production report will be able to provide the yen with support. Due later at 11:50 pm GMT, the value of output produced by the industrial sector is expected to have been flat in February after growing by 1.3% in January.

Aside from that, get a feel of market sentiment. Remember that the currency usually rallies in times of risk aversion. Good luck!

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When it rains, it pours! The yen was the biggest loser in the forex arena yesterday, as it got trampled on by all its major counterparts. USD/JPY rose 71 pips to close at 82.43. Meanwhile, EUR/JPY broke past key resistance and is now trading above the 116.00 handle.

The main reason why the yen lost out was because of a strong up move in USD/JPY, caused by some hawkish comments by Fed member Fred Bullard. Bullard basically said that the Fed may end up tightening monetary policy soon. In any case, his comments acted like a shot of Red Bull for USD/JPY. The sharp move in USD/JPY caused other yen pairs to rise, which is why we saw broad based yen weakness.

In other news, Japanese industrial production figures came in better than anticipated, printing at 0.4%. Expectations were at -0.1%. Keep in mind that this figure reflects industrial production growth during the month of February. I can’t even imagine what number we’ll see in next month’s report, which will factor in the effects of the earthquake and tsunami that hit Japan earlier this month.

Nothing coming out today, but that doesn’t mean you can kick back and relax. Yesterday’s price action is a prime example of how all markets are inter-related, so we should always be on our toes just in case some surprise news is released!

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Yesterday, the yen found itself in a world of hurt as it became the currency market’s punching bag. The yen fell against all other major currencies, pushed lower by the market’s more positive attitude towards risk and the prospect that the Federal Reserve will eventually normalize monetary policy once QE2 ends in June.

Risk appetite was so strong that even the better-than-expected result of Japan’s preliminary industrial production report was unable to lift the yen! The report revealed a 0.4% increase, opposite the 0.1% the market consensus.

Let’s see if the Tankan manufacturing index, which is used to gauge the direction of Japan’s manufacturing industry, will be able to help the yen recuperate its losses. Scheduled to come out at 11:50 pm GMT, it is slated to print a reading of 6 for the first quarter of 2011. If forecast holds, it will be a 1 point improvement from the prior quarter’s reading.

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It seems like bears started their April fools’ joke early on the yen by hiding its mojo! It reached only as high as 82.56 against the dollar before ending the day with a 29-pip loss. Meanwhile against the euro, it lost 80 pips as EUR/JPY parked at 117.90 at the end of the day.

Perhaps the bad vibes that might have come from the manufacturing PMI for March gave traders more reason to be devious. The index printed near its two-year low during the month at 46.4 after coming in at 52.9, reflecting the ill effects of the earthquake and tsunami that hit Japan earlier in March.

I wonder if the relatively positive Tankan reports for the first quarter of 2011 will help the yen in finding its mojo. Earlier today it was reported that the Tankan Manufacturing Index came in a point higher than its reading in December at 6 which was just what analysts were eyeing. Japanese manufacturers were off to a strong start so it wasn’t really much of a surprise to see an improvement in business conditions.

Other industries outside of manufacturing also improved as reflected by the Tankan Non-Manufacturing Index that printed thrice its previous reading at 3 and beat the forecast of 2.

That’s all we have on tap for the yen on the economic front today but make sure you keep tabs on the NFP report from the U.S. later at 12:30 GMT as it could shift market sentiment. Remember that the yen usually rallies in times of risk aversion. Good luck!

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Whoever said that the effects of a coordinated currency intervention don’t last long must be hiding under his bed by now! A healthy surge of risk appetite in markets last Friday weakened the low-yielding yen further in the charts, bringing USD/JPY to a six-month high at 84.11, while EUR/JPY also basked in a 172-pip gain to 119.62.

What’s interesting in the yen’s weakness is that Japanese manufacturers actually [I]like[/I] it. You see, Japan’s manufacturing and exports industries make up a huge part of its economy, and a strong yen would only decrease their competitiveness. Heck, Japan could use any help it could get after the tsunami and earthquakes have done their number on its economy!

Except for the BOJ monetary policy announcement on Thursday at 12:00 am GMT, Japan’s economic board is light for this week. If you want to trade Japan’s news though, you will have to wait until Wednesday at 5:00 am GMT when the leading indicators report is released. Meanwhile, other reports due from Japan are the current account data on Thursday at 11:50 pm GMT, the BOJ monthly report on Friday at 5:00 am GMT, and the Economy Watchers sentiment also on Friday at 5:00 am GMT.

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Banzai! With the lack of reports from the Japan yesterday, the yen turned ninja and sneaked in a few pips against its major counterparts. USD/JPY dipped by 16 pips to 84.03, EUR/JPY suffered a 35-pip loss at 119.47, and GBP/JPY ended the day 13 pips below its open price at 135.51.

Since no economic reports were released from Japan yesterday, forex junkies are crediting the yen’s rise to repatriation flows. You see, many believe that on Thursday the Bank of Japan could actually weaken the yen either by increasing their asset purchasing program to 50 trillion JPY or setting up a special lending program to help reconstruction efforts like they did after the Kobe earthquake in 1995.

While waiting to see which move the BOJ is going to make you can trade Japan’s leading indicators report due to come out tomorrow at 5:00 am GMT. Markets expect the index of 12 economic indicators to surpass January’s 101.5% rise with a 104.3% increase in February, but a higher number might mean that the Japanese economy was gaining momentum, at least before the earthquake in March.

Good luck in your trades today!

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If you thought you had a bad day yesterday, just look at how the yen performed on the charts! The Asian currency fell to its 11-month low against the Aussie, pound, euro, and Loonie. Meanwhile, against the dollar, it closed at its six-month low at 84.87.

Talks about the BOJ putting off plans to tighten monetary policy while other central banks are already thinking about raising interest rates might have been one reason why the yen ended up in the bear lair. The possibility of another joint intervention must have scared away yen bulls too. Finance Minister Yoshiko Noda announced yesterday that he would give his G7 buddies a call to continue taming the currency.

I wonder if the leading indicators report for February will allow the yen to get a breather in today’s trading. Due at 5:00 am GMT, the index is expected to print higher at 104.3% than its 101.5% reading in January. I wouldn’t really keep my hopes up though. Remember that it’s only a third-tier report and it usually has a muted effect on the market.

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Yen bears attaaaack! The yen lost heavily against its major counterparts yesterday as traders priced in the BOJ’s monetary policy decision today at 11:50 pm GMT. USD/JPY rose for the second day in a row to 85.44; EUR/JPY rocketed by 181 pips, and GBP/JPY capped the day with a 145-pip win at 139.55.

As I mentioned before, many believe that the Bank of Japan will try to weaken the yen during their policy statement either by announcing a 50 trillion JPY increase in their asset purchasing program, or placing a special lending program to help post-tsunami reconstruction efforts in Japan.

Be careful on trading the announcement though, as the BOJ could also keep their current policies steady, which might strengthen the yen against its counterparts. Oh, and watch for the other big-hitting reports in the other regions, will ya? I hear that the BOE and the ECB are also set to hit the stages today with their own interest rate decisions. Remember that the low-yielding yen usually benefits from dips in risk appetite.

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No amount of bad vibes can take this steamroller down! Despite news of more economic stimulus from the BOJ and another earthquake in Japan, the yen gained on its major counterparts yesterday. USD/JPY slipped 51 pips to 84.93, while EUR/JPY took a 97-pip and close at 121.47.

While ECB’s Trichet was busy cooking up cautious words in his press conference, word got around that another earthquake hit the shores near Japan, which might explain other traders’ flight to the low-yielding yen. You see, if traders had based their decisions on fundamentals alone, the yen would’ve taken a hit.

Yesterday the Bank of Japan not only kept its interest rates to between 0.00% and 0.10%, they also downgraded their economic growth forecast, citing the earthquake and tsunami as the culprits. In fact, the BOJ also announced that it would provide 1 trillion yen in loans to help jump start Japan’s recovery efforts.

I guess we’ll know more about the BOJ’s sentiments today when the BOJ monthly report is released at 5:00 am GMT. Since BOJ Governor Shirakawa sounded optimistic in his speech following the interest rate announcement, many expect the report to show some positive comments.

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Oh, what a slump! The yen traded lower against most of its major counterparts last Friday when Japan released weak economic figures. It managed to squeeze a few gains from the Greenback as USD/JPY ended 8 pips below its open price of 84.93, but it fell sharply against the euro and the pound.

Japan’s current account came in weaker than expected, printing a surplus of 1.21 trillion JPY, which was lower than the projected 1.33 trillion JPY figure. A few hours after the current account was released, the Economy Watchers Sentiment report showed that workers became largely pessimistic in March. The index fell from 48.4 to its two-year low of 27.7 during the month when the earthquake and tsunami hit Japan.

Today, the freshly released core machinery orders showed a 2.3% drop for February, way worse than the projected 0.9% dip. Since the report is a leading indicator of production, the weak figure suggests that producers could cut back on their manufacturing activity in the coming months.

Tomorrow, the BOJ’s monetary policy meeting minutes are due and these could shed more light on the central bank’s decision to keep rates on hold last week. The minutes of their latest meeting could also contain some hints on their future monetary policy plans, so make sure you check it out!

Other than that, there are no other red flags on tap, which means that the yen’s movement could depend on market sentiment. Keep in mind that the market is prone to mood swings so y’all better stay on your toes!

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Thanks to a brief relief rally, the yen managed to come out as the big winner in the Forex arena yesterday. EUR/JPY and GBP/JPY dropped 72 and 73 pips respectively to close at 122.10 and 138.36.

There were no celebrations however, as the main reason why risk aversion took place in the market was because Japan was hit with yet ANOTHER earthquake, marking the second time in less than a week. People are still recovering from the 9.0 earthquake and tsunami that hit the north-eastern coast of Japan a month ago and the subsequent aftershocks aren’t helping one bit. Let’s keep praying for Japan and hope that the country can get back on its feet soon.

Later today, the BOJ will be releasing the minutes of their latest MPC meeting. Let’s see what the BOJ had to say about the earthquake and what they plan to do to help boost the economy to get it back on track.

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PipDiddy, thanks for good job. Appriciate that.

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Another one strikes Japan! Just when almost everyone thought that Japan is already getting back on its feet after the March 11 quake, a couple of strong aftershocks shook the nation. How did the yen react?

Because of the most recent tremors, the government raised the nuclear crisis alert level to 7, which is now as high as that of the 1986 Chernobyl crisis. This means that the increased level of radioactivity requires that a wider evacuation zone as health and environmental risks grew worse. Yikes! This prompted most investors to unwind their risky positions and flee back to the safety of the Japanese yen.

Minutes from the latest BOJ policy meeting revealed that central bank officials were very concerned about the economic repercussions of the quake. In fact, some policymakers suggested that they increase the size of their asset-buying program in order to provide further support for the Japanese economy. They also stressed the need to stimulate lending and preventing the deterioration of confidence in Japan. Does this mean the BOJ would cut rates even further? We’ll just have to wait and see!

No other reports are due from Japan for the rest of the week so y’all better stay updated on the nuclear situation and rebuilding efforts of the country to figure out where the yen is headed.