Talking Points:
- The Yen was pressured by official business sentiment data
- Large, corporate Japan has turned very gloomy
- Global uncertainty is very likely taking a toll
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The Japanese Yen weakened Tuesday on news that businesses were gloomier than they had been for a year.
The second quarter’s “large all-industry” Business Sentiment Index (BSI) from the Ministry of Finance fell 2 points, having previously risen by 1.3. There was broad-based foreboding across the sub-indexes too. Large manufacturing sentiment swooned a nasty 2.9 points on the quarter, with the large non-manufacturing segment’s down by 1.6.
This was a relentlessly downbeat survey which is probably Yen-negative both on the bald facts of weaker sentiment and in that it argues strongly for the maintenance of ultra-easy monetary policy if not further loosening.
The US Dollar rose very modestly against the Japanese currency in the wake of the data, which admittedly are rarely big market movers.
The idea that trickier times lie ahead for the global economy as 2017 ages is not a new one. Uncertainties abound and some key factors have only become less predictable. Look at the UK’s recent election for evidence of that, if you need it. Unfortunately for Japan much of its prospective growth depends on global demand. The domestic situation remains mired by the enduring weakness of inflation expectations.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
