Japanese Yen Steady Despite Monthly Activity Miss

2017-05-23 05:06:00 David Cottle, Analyst

Talking Points:

A monthly index of Japanese activity suggested that March was poor
We already have official GDP data for the period, which was broadly upbeat
But the latest data won’t encourage those who fret that we may have seen the year’s high point

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The Japanese Yen saw little action Tuesday despite release of data suggesting that growth may be faltering in its home economy.

The official All-Activity Index fell 0.6% on the month. That was just worse than the 0.5% fall expected but far below February’s 0.7% gain. The AAI evaluates the monthly change in overall production from all parts of Japan’s economy, including the public sector.

Other Japanese economic data released of late have been fairly upbeat, whether they be trade figures or overall growth for 2017’s first quarter. However, there are some question marks over whether the relatively perky global trade picture which has emerged this year will endure, especially given Chinese authorities’ reported focus on regulation and debt cutting. The AAI suggests that these question marks are correctly placed.

Domestically, Japanese inflation also remains woefully below target, with demand and wages still remarkably unresponsive to vast stimulus. Investors will know more on this score when consumer price numbers for April are released Friday. Expectations are centered around a 0.4% on-year headline gain. This would be much more robust than the 0.2% seen in March, but still nowhere near the Bank of Japan’s 2% target. The central bank expects CPI’s gains to get up there at some point in the 2018 fiscal year.

However, in an Asian session short of major domestic news, the AAII didn’t move the Yen. USD/JPY inched up a little in morning trade but had already reached a plateau around 111.16 before the release, from which the data failed to dislodge it.