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Japanese yen higher across the board as political risks rise

Japanese yen daily update

BY DEB SHAW | 

Japanese yen daily update

The Japanese yen is higher against all major currencies as Abe's support deteriorates. The yen is currently the strongest against the Australian dollar, the Canadian dollar and the euro. Over the weekend, a survey by Jiji Press suggested that support for Abe fell by 9.4 percentage points down to 39.3 percent. Disapproval of Abe's leadership now exceeds approval. As the survey was conducted before the Japanese finance ministry admitted to doctoring the documents, future polls are likely to trend even lower. One LDP lawmaker has already called for Abe to resign.

Given the risk of Abe's resignation, the future of "Abenomics" is in doubt. Looking at other markets, risk sentiment appears to be waning as high-beta currencies such as the Australian dollar sell off sharply. As Trump takes aim at China, commodities and currencies with exposure to China are weakening. The Japanese yen, due to its safe haven qualities, is strengthening as a result. Our short-term and medium-term outlook on the yen remains bullish.   

USD/JPY is currently trading above 105.80. EUR/JPY is currently down and trading above 129.90.

Turning to Japanese economic data this week, we’ll get sentiment surveys and inflation figures. The merchandise trade balance was much better than expected (¥3.4b vs. -¥99.6b expected) due to a slowing pace of imports. Tomorrow, we’ll see the leading economic index for January. On Thursday, we’ll get Nikkei manufacturing PMIs for March and the all industry activity index for January. On Friday, we’ll see the national consumer price index and cross-border stock and bond investments. Last week, Japanese industrial output missed expectations.

Updated 
Outlook
Neutral

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