(10 APRIL 2018)DAILY MARKET BRIEF 2:Japan balance of payment is taking off amid higher consumer confidence
Though an inflation below its 2% target (1.50% as of February 2018) adding up with the challenging task of changing its population’s “deflationary” state of mind, Japan economy remains solid. Following recent modest slowdown in first quarter Tankan manufacturing indicator (given at 24 while previous estimated at 25), Japan recent data releases are pleasing, starting with February balance of payments that recovers from recent December 2017 – January 2018 declines, given at JPY 2’076 billion (USD 19.5 billion), valued above its 2 years average of JPY 1’723. Largest contributors being for instance Goods and Services +3’114 (previous: -8’348). Though a slight decline in business sentiment and weak private consumption in February (monthly retail sales at +0.40%), Japan consumer confidence remains strong for the month of March, in line with previous month number of 44.3 and remaining at 5 years highs, thus confirming the view of a rather strong economic growth potential.
Suffering from continued currency appreciation, Japan current challenge lies in devaluing its currency, despite continued dovish monetary policy initiated by Bank of Japan Governor Kuroda who maintains the key rate in the range of 0% – -0.10% since February 2016, a measure that seems to falter since the beginning of 2017 (USD/JPY: -8.54%). Accordingly, USD/JPY currently trading at 106.98 is expected to continue its bullish trend started in March 25th, bouncing off from 104.56 low and approaching hourly resistance given at 107.90 (14/02/2018 high). Expected to head along the 107.25 range in the short-term.
By Vincent Mivelaz
