The Japanese yen is slightly weaker against all major currencies except the US dollar today. The yen is currently the weakest against the Australian dollar. Yesterday, the yen was mixed and strengthened against the US dollar and the British pound, but fell against the Australian dollar and the euro.
Looking at yen trading conditions more broadly, the yen remains in a bearish trend despite decelerating global growth. In an deeper analysis of the yen published yesterday, we contended that the currency is likely to enter a bullish trend over the coming weeks. This is because the yen is a safe haven currency, and is likely to benefit from decelerating global growth. While the threat of future rate hikes means that the yen is trading as a proxy for inflation today, the picture will change once US growth more clearly decelerates from its peak in Q1 2018. Once US economic data deteriorates, risk sentiment will be less benign, helping the yen given its safe haven characteristics. Our short-term and medium-term outlook on the yen is bearish.
USD/JPY is currently trading above 109.30. EUR/JPY is currently up slightly and trading above 130.40.
This is a relatively light week for the Japanese yen economic calendar. The BoJ’s monetary policy meeting minutes contained no changes to monetary policy. Household spending for March (-0.7% vs. 1.1% expected) was below expectations. YoY March labor cash earnings (2.1% vs. 1.1% expected) were higher than expected while the leading economic index for March (105 vs. 105.2) was below expectations. The BoJ’s summary of opinions suggested that the Bank was making preparations to warn markets regarding a withdrawal of stimulus at some point in the future. The March current account (¥3,122.3b vs. ¥3,009.2b expected) and the Eco Watchers survey outlook for April (50.1 vs. 49.9 expected) was better than expected. Japanese investments in foreign bonds (-¥363.7b) and foreign investments in Japanese equities (-¥0.3b) suggest capital inflows into Japan. M2 figures for April (3.3% vs. 3.2% expected) were slightly ahead of expectations. Last week, Markit manufacturing PMIs were slightly ahead of expectations.