Talking Points

  • The Japanese Yen was already giving back some ground to the US Dollar
  • That process continued but did not accelerate notably after some weaker trade data
  • The breakdown showed no obvious weakness, but exports came in below elevated expectations

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The Japanese Yen continued to slip against the US Dollar Monday following news of a surprise trade deficit in May.

The trade balance was -JPY203.4 billion ($1.83 billion) that month, according to official figures. That was hugely below the JPY43.3 billion surplus which markets had expected.

That said the data breakdown was more positive. Imports increased by a chunky 17.8% annualized, while exports slightly underwhelmed. They rose by 14.9% where a gain of about 16% had been expected.

Still, this is hardly an export collapse. Indeed exports to all of Japan’s major client areas were up quite strongly. Those to China rose 23.9%, to the European Union 19.8% and to the US 11.6%.

The numbers won’t have any impact on the prognosis that ultra-loose Japanese monetary policy will be with us for a good while yet, a prognosis underscored somewhat by Bank of Kapan Governor Kuroda’s disinclination to discuss any exit from it when he met the press last week.

Sure enough, currency impact was minimal. USD/JPY continued to inch higher in the wake of the data, but it had been drifting upward in any event.

Japanese Yen Continues Lower After Trade Balance Miss

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX