The Japanese yen is mostly up today. The yen is currently the strongest against the US dollar, the British pound and the Canadian dollar. Yesterday, the yen moved higher despite a rebound in riskier assets such as the S&P 500 index. Today, the yen is mostly strengthening following disappointing economic data.
Year-over-year industrial production was much lower than forecast, while Tokyo inflation numbers were also below expectations. While expectations have been rising for the Bank of Japan to tighten monetary policy, the latest figures suggest that the Japanese economy remains fairly weak. The slowing pace of industrial growth is particularly bad news, as it suggest slowing growth in the Asia-Pacific region (historically the fastest growing part of the world). Our short-term and medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 106.20. EUR/JPY is currently flat and trading above 130.90.
Turning to Japanese economic data, this is a relatively light week. Retail sales figures for February (1.6% vs. 1.7% expected) were lower than expectations. Foreigners continue to sell Japanese stocks (-¥2,161.6b) while Japanese investors buy foreign bonds (+¥790.1b). For now, capital is flowing out of Japan. The consumer price index for Tokyo (1% vs. 1.8% expected) and industrial production (1.4% vs. 2.4% expected) missed expectations. The unemployment rate (2.5% vs. 2.6% expected) was better than expected. Last week, national CPI met expectations.