Daily Economic Commentary: Japan

It’s a knock-out, folks! After yesterday’s round of risk appetite, the Japanese Yen was unable to get back on its feet as its major counterparts threw in punch after punch. USD/JPY closed 5 pips shy of the 79.00 handle while EUR/JPY ended the day at 100.80.

Japan didn’t release any economic data yesterday, leaving the yen at the mercy of risk sentiment. Unfortunately for the lower-yielding currency, markets seem to be pleased with Greece’s progress on their coalition government as traders found the guts to buy higher-yielding currencies.

There are no reports on Japan’s schedule until the end of the week, which means that the yen could stay sensitive to risk sentiment. Stay on your toes at all times!

The yen took a big hit yesterday as speculations of more monetary easing from the Bank of Japan (BOJ)rose. According to news reports, lawmakers could pass a tax hike that could give the central bank a bit of room to ease further. The currency marked its second day of defeat versus the dollar as USD/JPY closed the day at 81 pips higher from its opening price during the Asian trading session yesterday.

No data was released yesterday and none will be released again today but I suspect that a reversal on USD/JPY’s downtrend may be in the cards. Looking at the bigger picture, there are some signs popping up that USD/JPY’s could rally higher. For instance, the falling trend line resistance on the daily has been broken. In addition, the last two candles have been very bullish, as USD/JPY closed very near its highs that day.

The yen weakened slightly against its major counterparts last Friday as hopes of an agreement of euro zone officials stabilized risk aversion. USD/JPY inched 13 pips higher while EUR/JPY snuck in a 72-pip gain. What reports are set to come out from Japan this week?

The price of services bought by corporations will be released today at 11:50 pm GMT. After that, the next action we’ll see will come on Wednesday when Japan prints its retail sales data also at 11:50 pm GMT.

Thursday will be a big day as the manufacturing PMI, household spending, Japan and Tokyo’s CPI, jobless rate, and the preliminary industrial production are released between 11:15 to 11:30 pm GMT. Lastly, the housing starts data will come out on Friday at 5:00 am GMT.

Good luck trading this week, kids!

No weakness here! The yen was pure muscle on the charts yesterday as it beefed up against all of its major counterparts. It snatched 84 pips away from the dollar, while gaining 140 pips against the euro and 123 pips against the pound. Can we expect more of the same today?

Maybe… that is, if risk sentiment continues to favor the yen! Yesterday’s bout of risk aversion led to safe haven flows that benefited the Japanese currency, as traders avoided risk taking in light of uncertainty surrounding the European debt crisis.

No major Japanese reports on the economic calendar today, so it looks like risk sentiment will remain the key driver behind yen price action. Remember homies, when risk sentiment turns sour, expect the yen to show its power!

Up-and-down day for the yen, as it edged higher against the dollar and euro but lost out against the pound. USD/JPY and EUR/JPY dropped 19 and 30 pips to finish at 79.45 and 99.27 respectively. Meanwhile, GBP/JPY ended the day at 124.28, up 27 pips from its opening price.

It appears that the lower house of the Japanese parliament passed the recent bill that was pushing to bring the consumption tax up to 10% within the next three years. Japanese Prime Minister Yoshihiko Noda’s Democratic Party, the Liberal Democratic Party and New Komeito joined forces to push the vote to an overwhelming 363 to 96. The bill will now be passed to the upper house, where it is expected to be approved.

Oddly enough though, a group of members from the Democratic Party, led by Party Leader Ichiro Ozama and 57 of his fanatics, all voted AGAINST the passing of the bill. Isn’t it weird that the Prime Minister and the Party Leader don’t agree on the same issue?

The truth is, political games are the norm in Japan. The bad news though, is that the instability may prove to be detrimental to the Japanese economy in the long-run, as it makes passing and implementation of economic programs much more difficult.

Later today at 11:50 pm GMT, Japanese retail sales will hit the airwaves. Expectations are that sales increased 3.1% year-on-year, slightly lower than last month’s 5.7% increase. A higher-than-anticipated result could spark a mini risk rally during the Tokyo session.

The Japanese yen lost ground against most of its major counterparts, except for the British pound. GBP/JPY closed 18 pips down from its 124.28 open price while EUR/JPY chalked up a tiny gain as ended the day at 99.39. Can the yen bounce back today?

It seems that political troubles are brewing in Japan as lawmakers aren’t seeing eye to eye when it comes to the newly passed consumption tax bill. However, several members of the lower house voted against the bill while Democratic Party of Japan leader Ichiro Ozawa is even considering forming a new political party on his own. Talk about drama!

As for economic releases, Japan’s retail sales figure came in better than expected for May as it showed a 3.6% annual increase. Although this was much weaker than the 5.7% year-over-year increase printed last April, the May reading was still higher than the estimated 3.1% rise.

Japan is set to release inflation data along with its annual household spending report at 11:30 pm GMT today. Tokyo’s core CPI figure is expected to dip by 0.7% while the national core CPI could see a mere 0.1% uptick. Although these reports aren’t expected to move the yen pairs that much, it would be helpful to take note of how the actual results turn out in order to figure out what’s next for the Japanese economy.

Flawless victory! With risk sentiment working in favor of the yen, the Japanese currency was able to record solid gains against its top three counterparts. While USD/JPY ended the day 28 pips lower, EUR/JPY lost 50 pips and GBP/JPY slid 84 pips.

With the markets in full risk-off mode, the yen had an easy time making its way up the charts. However, Japan’s releases might have had a hand in yesterday’s strong demand for the yen as well. After all, it posted a couple of pretty upbeat economic reports - something we don’t see too often from Japan!

The upside surprise in retail sales, which I discussed yesterday, started the day off and was followed up by a stronger-than-expected household spending report (4.0% vs 2.5%) and a lower-than-expected unemployment rate (4.4% vs 4.6%).

However, we also saw a fair share of downbeat data earlier today, as the national core CPI (-0.1% vs 0.1%) and preliminary industrial production (-3.1% vs -2.7%) fell below expectations.

Today, we only have housing starts data on tap (forecasted to show a 6.% increase following the previous 10.3% rise), so it looks like risk sentiment will continue to drive yen price action. If the markets remain risk averse, you can probably count on the yen to extend its gains!

The yen painted the town red on Friday–with red candlesticks, that is! The Asian currency lost against all of its major counterparts as risk appetite kicked in. It gave up 41 pips to the dollar, 227 pips to the euro, and 194 pips to the pound.

As I explained in my EUR and USD commentaries, positive developments in the EU Summit pleased investors and sparked risk rally across the board. If you’re a student of the School of Pipsology you probably know that the yen and risk appetite don’t go well together.

It might not have also helped the yen that reports from Japan came in mixed. While household spending (4.0% vs 2.5%), Tokyo core CPI (-0.6% vs -0.7%), unemployment rate (4.4% vs 4.6%), and housing starts (9.3% vs 6.6%) came in better than expected for June, the preliminary industrial production report fell short of expectations (-3.1% vs -2.7%).

However, earlier today, the yen rallied against most of its counterparts following the Tankan reports for Q2 2012. Data from the bank of Japan revealed that manufacturing conditions weren’t so bad during the quarter as most analysts predicted. The Tankan manufacturing index came in at -1 versus the -4 forecast. Meanwhile, the Tankan non-manufacturing index topped forecasts (consensus was at 6), printing at 8.

I’m not sure if the yen could sustain its run for the rest of the day though. That will probably depend on market sentiment. So make sure you gauge the market’s mood ayt? Keep in mind that the yen usually rallies when risk aversion kicks in. Good luck!

Thanks to better-than-expected Tankan surveys, the yen found itself recording wins against the dollar, euro, and pound to start the week. Is this a sign of things to come?

From the very get-go, the yen started the week strong and hardly looked back. It got a good, early boost from the release of the Tankan surveys, which both printed upside surprises.

The manufacturing index posted a reading of -1 instead of remaining at -4, as many had anticipated. Meanwhile, the non-manufacturing index surged from 5 to 8, instead of just ticking up to a reading of 6, as forecasts had predicted.

Of course, it also helped that markets weren’t exactly in a risk-taking mood yesterday.

Unfortunately, the streak of good news ended today as the average cash earnings report came in disappointingly, showing a decline of 0.8%, instead of an increase of 0.6%.

Will this bog down demand for the yen? Well, that’ll depend on the markets’ risk appetite! Risk sentiment has become an increasingly important factor in trading in recent weeks, so it’s hard to rule out more gains for the yen. After all, another bout of risk aversion may be just around the corner!

What a terrible Tuesday for the yen! It lost to all of its major counterparts with USD/JPY closing 29 pips higher at 79.82, EUR/JPY up 53 pips at 100.63, and GBP/JPY ending the day 23 pips above its opening price at 125.24.

More important than the worse-than-expected average earnings report from Japan, political squabbles among Japanese officials weighed on the yen. It was reported that the value of employment income received by workers dropped by 0.8% in May and disappointed the market’s consensus which was for a 0.6% increase.

Prime Ministers Noda’s proposal to increase the consumption tax gave 36 lawmakers in Japan enough reason to resign. Although some argue that the mass resignation may actually be good for the country, political uncertainty never bodes well for the yen.

The issue will probably continue to dictate the currency’s price action today given that our forex calendar is blank for Japanese economic reports. So stay tuned!

The yen shook things up yesterday as it traded mixed against other major currencies. The yen barely moved versus the safe haven dollar, but it did show some amazing strength against the European currencies like the euro and the pound. EUR/JPY fell to 100.08 from 100.63 while GBP/JPY dropped to 124.51 from 125.24.

There were no major news releases yesterday yet the yen was still able to get the upper hand. Most market participants believe that the ECB will cut rates and the BOE will implement another round of quantitative easing in their respective interest rate announcements.

Japan’s economic calendar today is pretty light, which means the yen’s direction will probably be driven by events happening in other major economies like the U.S. and the euro zone.

Winner, winner, teriyaki dinner! The yen bulls took full advantage of the weakness in European currencies and by the end of the day, EUR/JPY and GBP/JPY closed 112 and 50 pips lower respectively. Will the yen continue to dominate to end the week?

We could be in for another jam-packed New York session as we’ve got the U.S. NFP report lined up at 12:30 pm GMT. Take note that this is a high impact report that affects even the yen crosses, so make sure you keep those stop losses in check and practice good risk management techniques! Good luck trading today homies!

When risk aversion dominates the market, we all know which currency stands out! The low-yielding Japanese yen smashed its Western counterparts yesterday as the non-farm payrolls failed to meet expectations. The yen gained 117 pips over the euro and 71 pips versus the pound.

As I said in my U.S. write-up, risk aversion came back strong in the market due to the bad non-farm payrolls. The report only showed that only 80,000 net jobs were created versus the forecast of 97,000.

No major news report was released in Japan on Friday, but earlier today, the country’s Current Account Balance was published. It showed a surplus of 280 billion JPY, almost half the 420 billion JPY surplus initially expected.

There’s only one major report on Japan’s economic calendar this week. On Thursday, the Bank of Japan (BOJ) will be announcing its decision on interest rates. The central bank is widely expected to keep rates unchanged below 0.10%, so the market’s focus will probably shift to the accompanying statement. If the BOJ announces more quantitative easing, we could see the yen sell-off.

The yen was one of the losers in pipsville yesterday as bad data from Japan got mixed with profit-taking in markets. EUR/JPY and Guppy both inched 42 pips higher, while USD/JPY held steady with only a 4-pip slip. Will the yen turn its luck around today?

If it does, it probably won’t be from economic reports. Only the household confidence data at 5:00 am GMT and the tertiary industry activity and corporate goods price index at 11:50 pm GMT are scheduled for release today, so the yen bulls and bears will probably look at other major economies for some action.

Too bad that the yen didn’t get any support from yesterday’s data. Economic watchers in Japan had gloomier prospects for the economy as the Economic Watchers Sentiment data plunged from 47.2 to 43.8 in June. With the strong yen still hurting exports and consumer taxes due for a raise, who could blame them?

Ah, there’s nothing like a tinge of risk aversion to get the yen sprinting. The Asian currency once again outperformed most of its counterparts in yesterday’s trading. EUR/JPY ended the day 71 pips lower at 97.29, while USD/JPY was down 17 pips at 79.41 by the end of the New York session.

Concerns about Europe as well as worries about the FOMC minutes signaling that QE3 could soon be underway helped lure traders into the yen’s safety. The Tertiary Industry Activity report from Japan that was released earlier might also give you another reason to buy up the currency. (May’s figure came in at 0.7% and topped the 0.2% forecast).

But be careful!

Keep in mind that the BOJ will announce its interest rate decision at 12:00 am tomorrow and word around the hood is, the central bank could launch more easing measures. If that becomes the case, we could see the yen get sold off!

Then again, that’s just my two cents.

To ease or not to ease? That’s the question that has gotten the yen bulls and bears busy lately. It looks like the yen bears won the tug-o-pip war yesterday though, since both USD/JPY and EUR/JPY enjoyed 27-pip rallies. So why are investors are pricing in more BOJ stimulus?

Well, Forex Gump has already given 3 reasons why the BOJ could play the QE card, but I think investors are really watching the country’s trade data.

Being a highly export-related economy, The Land of the Rising Sun needs a weak currency to profit. But with the yen still at overpriced levels against its counterparts and Japan’s trade balance hanging at deficit levels, the BOJ has more motivation to keep on pumping stimulus.

Only the BOJ is set for the spotlight today, so make sure you pay extra attention to the interest rate decision!

Boo yah! The Japanese yen ended up higher against all of its major counterparts yesterday as the BOJ decided against further stimulus for Japan. USD/JPY spiked to a high of 79.96 then closed at 79.31 while EUR/JPY closed 21 pips below the 97.00 handle.

Volatility surged during the BOJ rate decision as traders were expecting to hear of fresh stimulus from the central bank. However, yen bears were disappointed to find out that, although the BOJ expanded their asset purchase program by 5 trillion JPY, they also cut their loan facility by the same amount. BOJ officials also hinted that they may purchase more treasury bills soon and possibly lower or remove the minimum bidding requirement for its credit lending operations.

Only a couple of medium-tier reports are due from Japan today and these are the revised industrial production figure for May and the BOJ monthly report. No revisions are expected for May’s industrial production reading, which showed a 3.1% drop for the month.

With barely any market-moving reports from Japan, expect the yen to be strongly influenced by risk sentiment during today’s trading sessions. Stay on your toes!

Due to the absence of market-moving events in Japan, the yen didn’t exhibit much volatility last Friday. USD/JPY, for instance, simply traded within a tight range within a 30-pip range and closed just 5 pips lower from its opening price.

We may see more of the same this week as Japan has absolutely zero tier 1 events on the economic docket. There’s the Monetary Policy Meeting minutes and the All Industries Activity, but those two reports normally do not have an effect on price action.

Then again, there’s a lot of the U.S.’s plate which could indirectly affect the yen’s price action. We’ll just have to see!

And on this corner, the undefeated heavyweight champion… The Japanese Yen! Thanks to weaker than expected U.S. data, risk aversion propped up the lower-yielding yen against all of its major counterparts yesterday. USD/JPY crashed below the 79.00 handle and closed at 78.85 while EUR/JPY ended the day 20 pips below the 97.00 handle.

Japanese traders and bankers were off on a holiday yesterday but this didn’t stop the yen from bagging plenty of gains. U.S. consumer spending data, which came in weaker than expected and posted its third consecutive monthly decline, forced traders to flee to the yen’s safe-haven arms.

Only the BOJ monetary policy meeting minutes are due from Japan today and this release is expected to shed light on the Japanese central bank’s most recent policy decision. It could also contain some hints on future monetary policy moves so make sure you keep close tabs on the release at 11:50 pm GMT.

Losses, losses everywhere! The yen just couldn’t catch a break yesterday as it weakened against all of its major counterparts. While USD/JPY rose 25 pips, EUR/JPY rallied 40 pips and GBP/JPY climbed 50 pips. Will the Japanese currency see more losses today?

Not much from Japan yesterday, though we did get a few interesting words from Finance Minister Jen Azumi. Apparently, Japan is back to playing its old game of scare the markets with words, a.k.a. jawboning! Azumi threatened to take action to weaken the yen if it continues rising up the charts. But will this be enough to keep buyers away?

Lucky for Azumi, the markets aren’t too interested in the safe haven yen at the moment, as QE3 speculation seems to be fueling bets on higher-yielding currencies. But if risk sentiment turns sour again, the yen could very well end up back on top!

Japan won’t be publishing any reports today, so in the meantime, keep tabs on risk sentiment. Keep in mind that if another risk rally ensues, the yen may weaken further. Good luck and happy pippin’!