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Yen Gains on Japan’s Cabinet Office Report

Yen Gains on Japan’s Cabinet Office Report

David Cottle, Analyst

Talking Points

  • The Yen got a modest lift after the official release of an upbeat economic assessment from Japan’s Cabinet Office.
  • Its views on household spending, exports and business sentiment have all been raised.
  • Inflation remains a sticking point.

The Japanese Yen strengthened against the US Dollar on Wednesday after the official release of an upgraded assessment of the Japanese economy by its Cabinet Office.

Some of the report’s highlights had been released the day before, at about the time Bank of Japan Governor Haruhiki Kuroda was giving his post-policy-meeting press conference. In the opinion of the Japanese government the economy is in moderate recovery, but improvements in some parts have been “delayed.”

The Cabinet Office has also upgraded its view on household spending, exports and business sentiment. The Yen has fallen more than 10% against the greenback since Donald Trump’s shock election win, and that has had its usual effect of cheering Japan’s enormous export sector.

It said that corporate profits’ rise appears to be pausing, although they remain high historically speaking. Perhaps more worryingly it also noted that the recent rise in business investment also looks to be slowing.

But the real devil in all this detail of course comes in the form of consumer prices. They remain “flat”, despite vast efforts to restore some pricing power to Japan. Even here, there is hope. A weaker Yen may help here, of course, if it endures into the new year, with import prices soaring in Yen terms.

USD/JPY slipped back to 117.59 after the release of this broadly upbeat assessment, well below the 118 level it had been at before.

A bit of Yen power: USD/JPY

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.