Japan Equities Rebounds as BOJ Injects Further, Yields and Yen Mixed

Japanese equities regained some strength due favorable exports data further injection of funds by BOJ, sending yields merely 1 basis points down. Yen was also mostly choppy as risk aversion and lower expectations of rate hike due to slow economic growth had opposite affects


Japan’s GDP Growth Slows, Reducing Rate-Rise Chance
Japan’s economic growth slowed more than economists expected in the second quarter, making it less likely the central bank will raise interest rates next week after a global credit crunch. The world’s second-largest economy expanded at a 0.5 percent annualized rate in the three months ended June 30 from a revised 3.2 percent in the first quarter, the Cabinet Office said in Tokyo today. The median estimate of 27 economists surveyed by Bloomberg News was for 0.9 percent growth.
Source: Bloomberg.com
Bank of Japan Adds Funds to Financial System for Second Day
The Bank of Japan added 600 billion yen ($5.1 billion) to the financial system at its 9:20 a.m. daily money-market operation in Tokyo. The Bank of Japan added 600 billion yen ($5.1 billion) to the financial system at its 9:20 a.m. daily money-market operation in Tokyo.
Source: Bloobmerg.com

Japan’s Current Account Surplus Grows on Weak Yen
Japan’s current account surplus widened in June as a weaker yen increased the value of exports. Exports rose 16.1 percent, the fastest pace in five months, helped by a weaker yen and demand from China and Europe, the ministry said. The surplus will keep expanding as Japanese investors profit from higher returns overseas, economists said. Source: Bloomberg.com
The Yen move steadily against almost its counterparts. Against the dollar it ranged between 118.50 and 118.10 after reaching as a high as 117.20 on Friday. Slower than expected growth of the economy further confirmed that BOJ shall not raise interest rates in the upcoming meeting and the probability of a rate hike fell from 75 percent last week to 25 percent. Increase in exports by fastest in five months and widening of trade balance proved that Japanese exporters reaped the benefits of low yen. However these benefits will be contained as Yen is expected to gain further if the risks in the global equity markets keep mounting due to liquidity crunch. Investors shall be reluctant to invest in high yielding countries curbing carry trades.

Despite current credit woes and slower growth of the economy the Nikkei inched higher closing 35 points up at 16,800.05. It seems that Central Bank?s intervention to calm the volatility in the market is showing some confidence in investors. Today the BOJ pumped 600 billion yen of funds in the banking system as tight conditions in money markets abroad spilled over into Japan?s call market. The rise was also led by exporting companies as current account balance widened and exports grew by 16.1 percent making the exporting companies cheap in the eyes of investors due to recent sharp decline.

Japanese Bonds traded mostly flat reflecting confused sentiments of investors. Although the fundamentals of the companies remain strong showed by favorable exports data but the spreading concerns of credit woes are holding investors back. The yield on the benchmark index was up only 1 basis points at 1.715 percent.