Talking Points:
- USD/JPY little changed after Japanese capital spending crossed the wires
- Expenditures rose 8.5% y/y versus 8.7% y/y expected and 11.2% y/y prior
- The Reserve Bank of Australia Rate Decision and US NFP’s loom ahead
Losing Money Trading the Japanese Yen? This Might Be Why.
The Japanese Yen showed a calm response to the US Dollar after Japan’s fourth quarter capital spending data crossed the wires. The report showed that investment rose 8.5 percent (YoY), worse than the +8.7 percent expectations, and less than the 11.2 percent growth in the third quarter. Excluding software, expenditures increased 8.9 percent (YoY), better than the +8.7 percent forecast, and lower than the 11.2 percent increase in the third quarter.
As Quantitative Strategist David Rodriguez pointed out, a lack of domestic inflation means that the Bank of Japan will likely keep policy unchanged through the foreseeable future. Today’s capex report likely did little to alter near-term inflation expectations as persistent deflation remains an obstacle for the central bank. The data also failed to inspire risk aversion: Nikkei 225 and S&P 500 futures were little changed at the time of the release.
Looking ahead, there remain several events which can see investors flocking to the safety-linked Yen. The nearest event on the docket is the Reserve Bank of Australia rate decision. The markets are not expecting the central bank to cut rates, but forward guidance may reveal how soon that may happen. Lastly, February’s US employment report is due on Friday. The labor data is a key economic news event which the Federal Reserve monitors.
