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Japanese Yen Slips As Local Corporate Capex Beats Forecasts

Japanese Yen Slips As Local Corporate Capex Beats Forecasts

2017-06-01 00:25:00
David Cottle, Analyst
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Talking Points:

  • The Yen was weaker against the US Dollar following a nice beat for Japanese corporate spending
  • It’s 4.5% on-year rise for the first quarter was comfortably above consensus
  • However, reports suggest that corporate Japan has continued to spend beyond the data horizon

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The Yen weakened a little against the US Dollar Thursday on news that Japanese companies increased their capital spending in this year’s first quarter.

Official figures showed a 4.5% annualized rise. That we better than both the 4% gain expected and the previous quarter’s 3.8% increase. A rise in capital spending suggests that Japanese companies see buoyant times ahead, but the Yen’s slip on the data suggests that those good times are seen for Japan’s strong export economy rather than its domestic setup.

USD/JPY ticked up to 110.87 after the numbers, from 110.70 just before.

Japanese Yen Slips As Local Corporate Capex Beats Forecasts

In any case the data may have been rendered quite historic by a report that capex will shoot up sharply this fiscal year. It suggested that Japan Inc. is increasing investment partly to overcome a shortfall in domestic labor.

Overall the Japanese economy is doing reasonably well. However, question marks still glower over domestic demand and inflation, although rising, remains feeble and nowhere near the Bank of Japan’s 2% target level. BoJ commentary strongly suggests that monetary policy will remain extraordinarily accommodative for the foreseeable future. This is now quite ingrained in the markets and can limit the effect of even strong domestic economic numbers on the Yen.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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

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