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Yen Slips, Then Rises After Patchy Tankan

Yen Slips, Then Rises After Patchy Tankan

David Cottle, Analyst

Talking Points:

  • A so-so Tankan report found Japanese business cautiously optimistic but perhaps wary
  • Large manufacturers’ moods improved as expected, but capex expectations have been pared back
  • The Yen weakened on the headlines, but seems to have gained on the detail

The Japanese Yen slipped a little in early trade on Wednesday after a mixed Tankan business survey hit the wires.

Sentiment at large manufacturers improved from three months ago, with its index rising to the 10 level in the fourth quarter, as markets had expected. So far so good but there was gloomier news on the capital expenditure side. The expected Capex rise among large manufacturers in the coming fiscal year slowed to 5.5%, from a previous level of 6.3%. This sort of data suggest that confidence could be waning at Japan Inc. and may have been what did the initial damage to the Yen.

Elsewhere in the key survey, it was a tale of near misses. The non-manufacturing index came in at 18, steady from the third quarter but a tick below market expectations.

Overall the Tankan seems to point to some wariness in corporate Japan, but very little outright gloom.

USD/JPY spiked up to 115.280 in the wake of the release, but the US Dollar failed to hold those gains. It soon returned to the 115.17 level where it was before the numbers before surrendering that ground an heading down to 115.08.

It clearly takes more than a so-so Tankan to wrest the markets away from their focus on the US Federal Reserve, which is widely expected to raise US interest rates for the first time this year on Thursday.

Brief Spike Only: USD/JPY

Yen Slips, Then Rises After Patchy Tankan

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.