Yen Fails to Capitalize on Stronger Consumer Sentiment

Talking Points

• Japanese consumer confidence rose handily in December
• Indeed, the official index hit its high point for the year
• Will that mean higher spending though? The jury is out.

The Japanese Yen failed to make any more headway against the US Dollar on Tuesday despite news that shoppers in its home country were feeling pretty good in December.

The consumer confidence index from Japan’s Cabinet Office rose to 43.1 that month, rising sharply from November’s 40.9 print. The index also surpassed September’s 43 level which had been 2016’s highest point to date, suggesting that Japanese consumers headed into the year-end retail period with as much vigor to spend as could reasonably be expected.

The Yen had already made up some ground against a generally shakier greenback this session, however. USD/JPY had fallen from 116.20 to 115.98 and the confidence data failed to give it any more pep. Indeed, the US Dollar continued to take back some ground, if only a little. It bought 115.51 after the numbers from 115.40 just before.

The question now is whether confidence will translate into higher real consumption and there the jury is very much out.

The latest household spending numbers, which admittedly were for November, painted a gloomy picture. Spending fell 1.5% compared to the same month in 2015, for a ninth straight month of declines. Investors will need to wait until the end of this month to see whether this new, optimistic confidence data can end that gloomy series.

Still inching back up: USD/JPY

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX