Talking Points:
- Japan’s jobless rate and job-to-applicant ratio crossed the wires in-line with expectations
- JPY hardly took notice as the markets seemed fixated on news after North Korean actions
- The anti-risk currency may be vulnerable to reactions from the white house as it was before
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The Japanese Yen did not show much of a reaction to an in-line jobs report while the markets seemed to be fixated on the aftermath of a missile test from North Korea. Japan’s jobless rate maintained at 2.8 percent in July as expected. In addition, the job-to-applicant ratio increased to 1.52 as predicted while the labor force participation rate sunk back to 60.8% from 61.0%.
Even with a low unemployment rate, the Bank of Japan is unlikely to change the current monetary policy setting anytime soon. Speaking at the Fed’s annual policy symposium in Jackson Hole, BoJ Governor Haruhiko Kuroda said Japan is still far from the 2 percent inflation target and central bank needs to continue with a very accommodative stance.
Earlier today, the anti-risk Yen gained as North Korea fired a missile over Japan. The cause of its appreciation was likely due to the unwinding of long risk positions, such as the carry trade. Once the short downtime in afterhours futures trading ended, Nikkei 225 fell as it responded to the news. Since then, stocks partially recovered as JPY fell.
Looking ahead, reactions from the major nations to North Korea’s action might leave the Japanese Yen vulnerable to risk trends. One of these remarks might stem from the White House. Last time this was the case when President Donald Trump responded to Pyongyang that escalating actions would be met with “fire and fury” from the US. After that, the Japanese Yen enjoyed a boost.
