Talking Points:
- Japan’s trade balance came in massively stronger than expected in November
- Imports missed forecasts while exports continued to do well
- Still, the Japanese Yen market was focused somewhere else
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Lower imports propelled Japan’s trade balance to a surprising surplus in November but the Japanese Yen market seemed to barely notice Monday.
The official trade balance came in at JPY113.4 billion (US$ 1billion) when a deficit of JPY40 billion had been expected. Exports rose a perky 16.2% on the year but imports rose by a lower than expected 17.2%. Despite missing forecasts imports don’t seem notably weak. This may cheer a Bank of Japan desperately trying to stoke some consumer demand and thereby perhaps some inflation. But a roundup of corporate pricing expectations from the BoJ itself released at the same time made rather grim reading on this score.
According to the Tankan survey series firms expect consumer prices to rise at an annualised 1.1% three years from now, the same rate as seen in the previous survey three months ago. The BoJ is publically committed to keeping monetary policy accommodative until consumer price inflation sustainably hits 2%. However, it seems that Japan’s corporate sector remains doggedly doubtful that this is even achievable.
There have been newswire whisperings that a change of policy tack could be coming, and that the central bank may yet tighten policy before that inflation goal is hit. But for the moment whisperings are all we have.
The foreign exchange market looked a bit holiday-ready on Monday, with very little movement in USD/JPY after this data. The BoJ’s stance has long made it difficult for anything except the inflation numbers to really move the Japanese currency in any case.
On its broader, daily chart, USD/JPY has slipped below a short-term uptrend line in place since late November. It is currently finding support at the lows of December 6, but the risk of a bearish ‘head and shoulders’ pattern appearing here seem to have increased. Such a pattern might put the rise up from those November lows into question, but markets are likely to be thinning as the holiday period approaches so some caution in interpretation is probably warranted. In short the uncommitted should probably await proof, even if a better buying opportunity could be coming up.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
