As global bond yields enjoy a rebound, the yen is selling off. Looking at 10-year yields, rates are rising for German and US government bonds. The yen was weak yesterday and remains weak this morning. The move in yields is likely to be temporary as concerns regarding low inflation remain prevalent. This week's FOMC minutes showed that many Federal Reserve Board members have doubts regarding inflation in the longer term. Weak inflation has also prevented the ECB from defining an end-date to its bond buying program. Until inflation moves meaningfully higher, the yen is likely to keep strengthening.
USD/JPY is currently trading just above 111.40. Looking at the euro vs. the yen, EUR/JPY is up slightly and is currently trading above 131.90.
This is a fairly light week for economic data releases relating to the yen. Trade balance data missed estimates. The trade balance was less than forecast (285b vs. 330b expected) while both exports (14% vs. 15.8%) and imports (18.9% vs. 20.2%) missed estimates. The All Industry Activity Index also missed estimates (-0.5% vs. -0.4% expected). Japanese bond investments resulted in a net inflow (231.3b) while stock investments resulted in a net outflow (-324.5b). Last week, GDP growth figures met expectations.
As the yen strengthens in relative terms against major currencies, we are upgrading the yen to bullish in the short-term. Note that the currency is looking overbought in the short-term, based on technical indicators on the daily chart.
As political developments overseas strengthen the yen, we are upgrading the yen to bullish. Looking at the yen on a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators when looking at a weekly chart.