Yen Sees Short-Lived Gains on Corporate Goods Price Pickup

Talking Points

• The Yen got a fleeting uptick from some punchy Japanese numbers
• Both corporate goods prices and machine orders data did much better than expected
• However, the Fed-fixated markets look one-way until Wednesday’s rate call

The US Dollar weakened slightly against the Yen on Monday as some Japanese inflation numbers came in stronger than the markets had expected.

Japan’s Corporate Goods Price Index rose 0.4% on the month in November. This was much above October’s 0.1% fall and was also higher than the 0.3% rise markets were expecting. On-year the CGPI rose 2.2%, hugely ahead of the 2.2% fall markets were looking for and the previous month’s 2.7% decline.

More bullish news from the Japanese economy was released at the same time. Machine orders rose 4.1% on the month in October, trashing both the 1.1% fall forecast and the 3.3% fall seen in September. These numbers appear to bode well for corporate Japan’s capital spending levels, with the caveat that this is a volatile series. And compared with October 2015, orders were down by 5.6%, which was a harder fall than markets had been looking for.

Despite the usual Yen-supportive powers of any numbers indicating the return of pricing power to Japan,

the data couldn’t provide the currency with much more than passing support. The foreign-exchange market is fixated on this week’s US Federal Reserve monetary policy conclave. This is widely expected to end with a rate increase, and forecasts of more to come in 2017.

USD/JPY slipped back to 115.39 after the numbers, from ten-month peaks at 115.54. However, it seems to have found a modest base there and looks to be heading higher again already.

Already heading back up: USD/JPY

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research