The yen was broadly weaker yesterday, although the currency has been strengthening this morning. Looking at USD/JPY, the pair is down slightly (indicating yen strength). Earlier today, corporate goods prices (a measure of input inflation) were higher than expectations. Year-over-year figures were 3.5% vs. 3.3% expected thanks to the ongoing bull market in commodities. Given the significance of upcoming US economic data and events (including PPI later today, CPI and the Fed meeting tomorrow), bond yields and the yen have been trading in a fairly tight range. We downgraded our short-term outlook on the yen to bearish following recent weakness in the currency. Our medium-term outlook remains bearish.
USD/JPY is currently trading just above 113.40. Looking at the euro vs. the yen, EUR/JPY is down slightly and is currently trading above 133.50.
This is a fairly light week for economic data releases relating to the yen. The corporate goods price index beat expectations (3.5% vs. 3.3% expected). The tertiary industry index was higher than the previous print (0.3% vs. -0.2% prior). Tomorrow, we’ll see machinery orders. On Thursday we’ll see cross-border stock and bond investments. We’ll also see Nikkei manufacturing PMIs and industry production. Finally on Friday we’ll get a series of Tankan surveys. Last week, GDP growth beat expectations.
As the yen weakens as inflation expectations rise, we are downgrading the yen to bearish in the short-term. Note that the currency is trading within normal conditions, based on technical indicators on the daily chart.
As the yen sells off on hopes for US tax cuts, we are downgrading the yen to bearish. 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.