JPY news - page 14
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USD/JPY forecast for the week of August 22, 2016
The USD/JPY pair fell during the course of the week, testing the 100 level. This is an area that has quite a bit of psychological significance level, so having said that it’s difficult to imagine that the market will simply break down through it with ease. Because of this, I think you can count on quite a bit of short-term volatility, and that given enough time potential rallies. A break down below the bottom of the candle for the week could send this market much lower, but you also have to worry about the Bank of Japan getting involved at that point in time. At this point in time, it’s probably better to trade this market on short-term charts.
63% of Japanese firms say government stimulus to have little effect
From the latest Reuters Corporate Survey
- 63% of Japan firms say govt economic stimulus to have little effect; 34% see no impact
- 45% of Japan firms say govt economic stimulus to have little effect on growth potential; 53% see no impact
- 37% see further BOJ easing needed, 62% say BOJ should not ease further
- Less than 5% of firms see economic boost from stimulus
Instead of stimulus, Reuters add that:Japan plans 3.2869 trillion Yen supplementary budget to finance Abe stimulus
Draft of budget as reported by Reuters
BOJ’s Kuroda Keeps Monetary Policy Off the Table at FinTech Forum
Financial technology has various implications for central banking, Bank of Japan Governor Haruhiko Kuroda explained at the bank’s first ever FinTech Forum.
“FinTech has various implications for central banking. FinTech has a wide influence on payments, settlements and financial services, and could stimulate various economic activities, including e-commerce and “sharing economy” businesses,” Kuroda said in prepared remarks at the FinTech Forum on August 24.
Japan’s top central banker made no mention of monetary policy in his remarks, leaving investors searching for clues after last month’s disappointing policy decision. The BOJ doubled the size of its ETF purchases last month, but stopped short of cutting interest rates deeper into negative territory or introducing new stimulus efforts to shore up the fledgling economy.
The BOJ’s next monetary policy meeting will be held September 20-21, at which time it is expected to unveil new easing measures consistent with Prime Minister Shinzo Abe’s pre-election promise.
In a report on Tuesday Markit/Nikkei said Japan’s manufacturing sector showed signs of improvement in August, despite contracting for a sixth consecutive month. The Markit/Nikkei flash manufacturing PMI improved to 49.6 in August from 49.3 the previous month. A separate gauge of output turned positive for the first time since February, raising cautious optimism that the worst of the factory downturn had ended.
Japan Foreign Bond Investment Rises in Week of August 19
Capital flows into Japanese bonds rose last week, while investment in stocks fell, according to the latest data released by the Ministry of Finance on Thursday.
Investors purchased a net of ¥433.1 billion worth of bonds in the week of August 19. Foreign bond investment totaled $1.297.5 billion the previous week.
Investors sold a net of ¥229.6 billion worth of stocks in the same week, following a net purchase of ¥94.7 billion.
Data on Japanese capital flows have direct implications on the Japanese yen, which is influenced by foreign investment.
The Japanese yen has gained nearly 6% against the US dollar over the past month and shows few signs of abating. After repeated attempts to weaken the yen, the Bank of Japan (BOJ) is viewed by investors as less capable of driving further depreciation in the local currency. The BOJ may have something to say about that at next month’s policy meeting, where it is expected to unveil new stimulus efforts to ignite a fuse in a moribund economy.
The BOJ nearly doubled the size of its ETF purchase program at the July 29 policy meeting, but stopped short of adjusting interest rates or unveiling new stimulus policies. Interest rates have been stuck in negative territory since the start of the year.
A weaker US dollar and growing expectations that the yen will appreciate further have also helped the yen score multi-year highs. The Brexit-inspired market selloff in late-June also promoted risk-off sentiment to the benefit of the Japanese currency.
The dollar-yen exchange rate was little changed at 100.5350 Thursday morning.
The Japanese government will release several batches of inflation data on Friday. Annual consumer price inflation has been in negative territory for four consecutive months. Negative CPI inflation is expected to persist into August.
• Japan’s CPI data in focus ahead of Yellen
• Markets are trading very quietly ahead of Chair Yellen’s speech.
• Biggest data point coming up: Japan’s CPI for Jul. (Asian morning Friday).
• Core rate exp. to rise marginally, but to remain well within negative territory.
• Another set of soft CPIs could raise the likelihood for more easing and thus hurt JPY.
Japan National CPI Remains Negative in July, as BOJ Mulls Policy Options
Japan’s consumer prices fell in July for a fifth consecutive month, upping the pressure on the central government to follow through with Prime Minister Shinzo Abe’s promise of more stimulus.
The national consumer price index (CPI) declined at an annualized 0.4% pace in July, following a 0.4% drop the previous month, the state-run Statistics Bureau reported Friday. The decline matched a median estimate of economists.
So-called core CPI, which measures price movement of a basket of goods and services less food products, fell 0.5% in the 12 months through July. The national core CPI rate fell at a similar rate the previous month.
Core inflation in Tokyo fell 0.4% annually in August following a 0.4% year-over-year drop the previous month.
July marked Japan’s fifth consecutive month of deflation, placing more pressure on policymakers to develop new measures for stimulating the economy. The Bank of Japan (BOJ) expanded its ETF purchase program at its July 29 policy meeting, but stopped short of reducing interest rates. The BOJ’s next meeting is scheduled for September.
Analysts widely expect the BOJ to up the ante at its September policy meeting after the Summary of Opinions report suggested there were plans for an extremely large” stimulus package.
More stimulus is all but a given in the wake of Prime Minister Shinzo Abe’s sweeping upper house election victory in July. The Japanese leader is looking to expand his so-called Abenomics program, and will likely do so this fall.
With a super-majority in both the upper house and lower house, Abe will also press for revising Japan’s US-drafted charter, long considered to be a source of humiliation among conservatives.
The Japanese economy slowed to a near-standstill in the second quarter, as plunging exports and weak business spending weighed. The economy expanded at an annualized 0.2% in the second quarter following an upwardly revised 2% gain the previous quarter.
H. Kuroda Confirms BOJ’s Intent to Expand Stimulus at Jackson Hole
Bank of Japan (BOJ) Governor Haruhiko Kuroda made it clear to the world on Saturday that he will do whatever it takes to revive the Japanese economy, signaling that policymakers may vote in more stimulus at their next meeting in September.
“The Bank of Japan will continue to carefully examine the risks and take additional easing measures without hesitation,” Kuroda said at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming.
He added, “It could be that long term inflation expectations are yet to be anchored in Japan.”
Japan’s deflationary spiral entered its fifth month in July, with national CPI falling 0.4% year-over-year. Core inflation fell at an annualized 0.5% rate, indicating broad deflationary pressures in the world’s third largest economy.
Recent figures also confirmed that the economy slowed to a near stand-still in the second quarter, rising at an annualized 0.2%. That followed an upwardly revised gain of 2% in the first quarter that was aided by an extra leap year day in February.
Kuroda’s comments on Saturday shined the spotlight on the BOJ’s September policy meeting. Between recorded quantitative easing and negative interest rates, Kuroda believes the central bank has an “extremely powerful policy scheme,” but that more decisive measures may be required “as we move on.”
Kuroda stopped short of specifying what additional measures the BOJ could adopt, but did acknowledge that there were limits in using “helicopter money,” a phrase that describes monetizing budget deficits and other forms of central bank financing.
The BOJ isn’t the only central bank struggling to come up with solutions to grow its economy. Advanced industrialized nations in Europe, North America and Australia are also stymied by weak inflation and fledgling growth. Federal Reserve Chair Janet Yellen talked about potential options to strengthen the economy in a speech on Friday, but also implied the Fed was moving closer to raising interest rates.
USD/JPY Rally to Test Resistance
USD/JPY broke out from its recent narrow trading range on Friday after comments from Fed Chair Janet Yellen and Fed Vice Chair Stanley Fischer made the case for a rate hike in the U.S. before the end of the year. Fischer’s comments are what sent the dollar soaring, as he noted that a hike could take place as early as September, while two rate increases are possible before the end of the year. USD/JPY benefited, rising more than 1%, its largest increase in nearly seven weeks. Resistance just above the 102.50 level is now within reach. Specifically, the minor corrective tops formed in early August at the 102.86 and 102.655 levels are likely being watched by technical traders, as is the falling 50-day moving average, which currently stands at the 102.75 level.
With short term price momentum indicators overbought, however, breaching this level of resistance could prove difficult over the near term. And, with two Federal Reserve officials coming out over the weekend playing down the likelihood of two rate increases before the end of the year, the dollar could consolidate its recent gains, thereby keeping further upside capped in USD/JPY. Federal Reserve Bank of Atlanta President Dennis Lockhart said in an interview that he “wouldn’t take [Mr. Fischer’s] position today”, while St. Louis Fed President James Bullard said that “two rate increases this year wouldn’t fit with his forecasts.”
On a move to the downside, potential support for USD/JPY is at the 10-day moving average near the 101.00 level. A drop below this moving average would diminish the bullish implications of the recent advance in the pair and suggest a return to key support at the 100-99 level is possible.
The calendar is heavy with data releases for Japan, with July household spending (forecast 1.1% month over month versus previous -1.1%), the July unemployment rate (forecast unchanged at 3.1%) and retails sales (forecast -0.9% year over year versus previous -1.4%). All are set for release overnight in the U.S. Today’s economic data in the U.S. includes July Personal Income (consensus 0.4%), Personal Spending (consensus 0.3%) and Core PCE Prices (consensus 0.1%). All are set for release at 8:30 ET. On Tuesday in the U.S., Consumer Confidence (consensus 97.0) is on the calendar. The big market-mover is set for Friday, when August nonfarm payroll is due for release. Consensus estimate is for an 180K increase. A strong number will reaffirm the case for a potential rate hike in the U.S. in September, likely sending the dollar higher and USD/JPY toward the next levels of overhead resistance at the end of the week.
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Japan: Retail trade for July: +1.4% m/m (expected +0.8%)