JPY news - page 27
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Japan plans record $830 bln spending & MOF to reduce issuance of most JGB maturities
Reuters with a couple of longer pieces on Japan's FY 2017/18 budget and also the issuance of Japanese government bonds
- Japan
plans to trim the issuance of Japanese government bonds of up to 20
years to maturity during the fiscal year starting April 1 in reaction to
soft demand for negative- or low-yielding bonds
- Is reducing the
overall JGB sales through auction to 141.2 trillion yen ($1.20
trillion), down from 147 trillion yen ($1.25 trillion) in the current
year and the lowest in seven years
- Ministry to cut the issuance of most maturities except for the longest end of the yield curve, such as 30- and 40-year bonds
Reuters for more hereJPY: The Underperformer In 2017
JPY, the underperformer.
We view the yen as likely to be the weakest major currency in the G10 in 2017, with USDJPY reaching 128. Moreover, in contrast to our forecasts for other major currencies, we do not expect the yen to recover vs. the USD in 2018; instead, we forecast continuing depreciation.
We view the Bank of Japan’s yield curve targeting strategy as leaving the JPY particularly vulnerable in an environment of rising global reflationary pressures. While yield curves in most G10 economies will respond to rising inflation by steepening, the BoJ has signalled that it will aim to keep the 10yr JGB yield anchored around zero. Against this backdrop, rising global inflation expectations will act to depress Japanese real yields relative to real yields elsewhere, undermining the yen. At some level of yen weakness, our economists note that the BOJ could adjust higher its target for long-end yields, which would likely be an important, limiting factor on the extent to which the JPY could weaken.
USD/JPY Forecast December 26, 2016
The USD/JPY pair fell slightly during the Friday session, as we continue to show signs of exhaustion. I believe that pullbacks will be great buying opportunities at lower levels, and that’s exactly what I’m looking for. I think that the 115-level underneath continues to be a bit of a “floor” in this market, and that given enough time we will not only test that area but find buyers somewhere near there as well. Ultimately, I believe that this market reaches towards the 120 handle. The market offers no selling opportunity is as far as I can see.
Japan - October BOJ meeting minutes
Bank of Japan October 31/November 1 meeting minutes are out now
USD/JPY Edges Lower to Channel Support
USD/JPY has edged lower since the open this week and is seen approaching support from a rising channel that dates back to a spike low posted on November 16.
The currency pair turned lower last week for a marginal loss to snap a prior 6-week winning streak. The turn lower comes ahead of notable resistance at 118.81, a level that had held the pair higher for most of 2015.
The price action in some of the Yen cross rates suggests the correction in the Yen pairs may not be short-lived, despite the strong upside momentum seen as of late. The commodity currencies posted sharp losses last week and a bearish engulfing weekly print is seen in CAD/JPY. A bearish evening star pattern is seen on the AUD/JPY and NZD/JPY weekly charts.
A break of the rising channel in USD/JPY could provide an early indication of a broader turn, but notable support is seen within close vicinity. A horizontal level at 116.08 references a spike low from August 2015 and is seen as important support for the pair.
The benchmark Nikkei average posted a small 0.16% decline in Asian trading. The index traded within a range for the bulk of the day to post a third consecutive daily decline.
The BoJ released minutes from their latest monetary policy meeting during the Asian session. The central bank left policy unchanged at their last meeting, keeping the interest rate at -0.1% and continuing with JGB purchases to maintain the 10-year yield around zero percent.
read more
The BOJ's inflation index, it's a national measure that takes out fresh food and energy costs, but does include processed and imported food prices.
Japanese Industrial Production Rises 1.5% in November, Preliminary Data Show
Japanese industrial production rose November, after flat-lining the previous month, preliminary data showed on Wednesday.
Industrial production climbed 1.5% compared to October, the Ministry of Economy, Trade and Industry said in a preliminary report. A median estimate of economists forecast a 1.8% increase.
Compared to a year ago, industrial production rose 4.6%, official data showed.
Output was revised down to zero in October. Preliminary estimates had shown a 0.1% increase.
Japanese manufacturers have battled strong headwinds all year long, but sentiment appears to be improving in the wake of the yen’s massive plunge since the November 8 US presidential election. The Bank of Japan’s latest Tankan survey showed brighter sentiment in the automotive and machinery sector.
PMI data courtesy of Markit Economics also show that manufacturing conditions have improved in the fourth quarter. Preliminary December manufacturing PMI rose to 51.9 this month, up from a final reading of 51.3 in November. Anything above 50 signals expansion in economic activity.
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BOJ Summary of Opinions: Economy in “Moderate Recovery” On Stronger Exports, Industrial Production
The Japanese economy is on a “moderate recovery trend” thanks to stronger exports and industrial production, the Bank of Japan’s December 19-20 Summary of Opinions showed on Thursday.
“Japan’s economy is on a moderate recovery trend. Exports have started to pick up recently and resilience in private consumption has increased,” the Summary stated. “Japan’s economy is highly likely to maintain relatively high growth as the positive effects resulting from a set of the government’s stimulus measures and the recovery in overseas economies continue.”
The Japanese economy expanded for a third straight quarter in July-September. Growth is expected to continue in the coming quarters amid the recent pick up in exports and industrial output. Output from Japan’s factories rose 1.5% in November, the Ministry of Economy, Trade and Industry said on Wednesday in a preliminary estimate.
Japanese policymakers have offered an upbeat view of the economy in recent weeks, with the government raising its outlook on economic growth for the first time in almost two years. However, household spending remains weak despite a tight labour market. While hopes for faster inflation may be warranted, higher living costs will drag on households’ ability to boost consumption.
The Bank of Japan has already pushed back their timeline of when they expect consumer inflation to reach the 2% target. Headline inflation has shown signs of progress in recent months, with the national consumer price index (CPI) rising for a second consecutive month in annual terms. However, core inflation fell for a ninth straight month over year-ago levels, while core consumer prices in Tokyo declined at the fastest rate in almost four years.
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2017 USD/JPY Annual Forecast
The USD/JPY had a tumultuous year in 2016, led to the downside by a stronger Japanese Yen due to ineffective Bank of Japan policies and to the upside by the threat of inflation in the U.S. and the delivery of higher interest rates from the U.S. Federal Reserve.
Essentially, the direction of the Forex pair was dictated by a dovish BOJ and a hawkish Fed.
2016 Market Forces
The USD/JPY began the year at 120.111 and proceeded to rally to 121.678 by January 29 on the heels of a hawkish Fed at the end of 2015. In late 2015, the Fed raised its benchmark interest rate by 25 basis points and projected it would deliver as many as four rate hikes in 2016.
However, at the first Fed monetary policy meeting in late January 2015, Fed Chair Janet Yellen was already signaling to investors that she and the Fed were not prepared to raise rates because of excessive market volatility and the possibility of a weaker U.S. labor market. Additionally, stubbornly low inflation remained under the central bank’s target of 2.0%.
The Fed continued to deliver a dovish tone throughout the Spring when it became clear to investors that the central bank would not likely raise rates until after the U.S. elections in November. The Dollar/Yen reached its low for the year on June 24 at 98.887, the same day the U.K. voted to leave the European Union, in a move that became known as Brexit.
From there, the USD/JPY proceeded to become range bound as global equity markets stabilized following a sharp sell-off that culminated with Brexit. With the worst apparently over, at least temporarily, demand for higher risk assets increased, putting pressure on the lower-yielding Japanese Yen.
The Dollar/Yen remained rangebound until early November when Donald Trump surprisingly won the U.S. Presidential election. From November 9 to December 15, the USD/JPY surged from 101.179 to 118.658 as investors bet that Trump’s policies would cause a resurgence in inflation. This helped drive up U.S. Treasury yields and stocks, making the U.S. Dollar a more desirable assets.
In December, the Fed raised rates 25 basis points and projected at least three rate hikes in 2017. The USD/JPY closed the year at 116.979, down 3.312 or -2.61%, but with enough upside momentum to carry over into 2017.
Bank of Japan Moves in 2016
From the Bank of Japan’s perspective, it liked the move at the end of the year since its policies throughout the year were generally useless at helping to boost the economy or weaken the Yen.
As far as the BoJ’s time table is concerned, on January 29, the USD/JPY topped after the central bank announced it was imposing a negative interest rate for the first time in an effort to jumpstart the Japanese economy out of years of stagnation.
On March 15, the BoJ left its major monetary policies unchanged but downgraded its view of the economy, opening the door to further action down the road.
On April 28, the Yen surged more than 3% against the U.S. Dollar after the BoJ stuck to its current package of policies aimed at stoking economic growth and inflation. The BoJ’s inaction defied market expectations that the central bank would take further steps to stimulate the economy.
The Japanese Yen spiked higher again on June 16 after the Bank of Japan refrained from offering additional monetary stimulus despite anemic inflation and weak global growth. This news sent the Yen spiking to a two-year high.
In late July, the BoJ once again disappointed investors by offering a moderate easing when many expected a more aggressive stimulus package.
Once again on September 21, the Bank of Japan surprised traders when it announced it was targeting a zero interest rate on its 10-year government bonds. The central bank called it a “new framework” because it hadn’t previously targeted a rate for the 10-year bond. Some found this news to be encouraging, but others wanted to see new direct stimulus measures.
On November 1, the central bank opted to leave policy unchanged, despite sharply cutting its inflation forecasts. It now forecasts that its annual inflation rate will reach 2% around fiscal 2018, which ends in March 2019, instead of fiscal 2017.
At its last meeting in 2016 and its first since Trump’s win drove the Dollar sharply higher against the Japanese Yen, the BoJ did nothing and said it will maintain policy as long as it is necessary to achieve and maintain the bank’s 2% price stability target in a stable manner.
2017 Forecast
At its last meeting the Bank of Japan upgraded its assessment of the economy, noting that a “moderate recovery trend had continued” while exports “picked up”. It also said that it expects the moderate recovery to turn into a modest expansion in the period ahead.
This is great news, however, the credit for the economy’s turnaround should go to Trump and the Fed.
With the BoJ expected to stand pat on policy for most of 2017 and the Fed likely to raise rates again, the interest rate differential should continue to favor the U.S. Dollar over the Japanese Yen in 2017.
The BoJ will face a decision, however, if rising global interest rates start to move Japanese Government Bond rates higher. This is because of the bank’s decision in September to target a zero interest rate on its 10-year government bonds.
I expect to see the USD/JPY continue to climb in 2017 if Trump’s policies drive up inflation as expected and the Fed chases inflation with at least three rate hikes. However, the Japanese Yen may at times pick up strength if the U.S. economy falters especially the labor market. Of course, the failure to create enough inflation to satisfy the Fed’s 2.0% mandate could also weaken the U.S. Dollar against the Yen.
source
Japan data: Nikkei Manufacturing PMI (December final): 52.4 (flash was 51.9)
The 'final' for the December Nikkei Manufacturing PMI