Thanks to rising global bond yields, the yen has been weakening for the past two days. The currency is especially weak against the US dollar. Given that the House of Representatives is expected to announce the first draft of the tax bill later today, bond yields are rising on expectations of higher inflation in the future. Yesterday, the Bank of Japan re-iterated its commitment to its existing monetary policies in its press conference. Japanese interest rates remain in negative territory, while the Bank's 'yield curve control' program remains in place.
USD/JPY is currently trading just above 113.80. EUR/JPY has been rebounding and is currently trading above 132.60.
As expected, the BoJ meeting was a non-event as the Bank remains committed to its current policies. Retail sales numbers missed expectations (2.2% vs. 2.5% expected). Unemployment figures came within expectations (2.8%) while household spending was much weaker than expectations (-0.3% vs. 0.7% expected). Nikkei manufacturing PMIs were slighly lower relative to the prior figures (52.8 vs. 52.9 prior). Finally, on Thursday, we’ll get cross-border stock and bond investments. Last week saw low CPI figures miss expectations.
After falling on rising global bond yields, we are downgrading the Japanese yen to neutral. The currency no longer looks oversold, looking at technical indicators on the daily chart.
After rising on higher global bond yields, we are upgrading the yen to neutral. Looking at the yen on a weekly chart, the currency remains far from overbought or oversold levels looking at various technical indicators. Thus trading conditions remain normal.