Today was a relatively eventful day for the Japanese yen. After 5 to 10-year Japanese government bond (JGB) yields rose beyond 0.1%, the Bank of Japan offered to buy an unlimited quantity of JGBs at two basis points above the previous close. It has offered unlimited buying at similar levels in the past as well. The BoJ also increased its planned purchases of 5 to 10-year to 450b yen (from 410b yen). The Bank of Japan frequently intervenes in the government bond market through "rinban" operations. The BoJ continues to signal an ongoing commitment to strong monetary easing. As we wrote in a commentary earlier this week, it's unlikely that the Bank of Japan will tighten monetary policy in the near future. Following the BoJ's actions, the yen is now weaker against the US dollar, the euro and the British pound. Our short-term and medium-term outlook on the yen remains bullish.
USD/JPY is currently trading above 109.70. EUR/JPY is currently up and trading above 137.20.
This is a fairly light week for economic data relating to the yen. The unemployment rate (2.8% vs. 2.7% expected) and household spending (-0.1%) were below expectations. Retail sales were ahead of expectations (3.6% vs. 1.8% expected). Industrial production data was significantly ahead of estimates (4.2% vs. 1.9% expected). However, consumer confidence (44.7), housing starts (-2.1%) and construction orders (-8.1%) were below estimates. Looking at the BoJ summary of opinions, some members signaled their desire to curb monetary stimulus assuming growth and price trends continue to improve. Cross-border stock (-¥300.5b) and bond (+¥41.1b) investments suggest net outflows from Japan for the first time in many weeks. Nikkei manufacturing PMIs beat estimates (54.8 vs. 54.4 expected), suggesting a positive outlook for the country's significant manufacturing sector. Last week, the yen strengthened after Governor Kuroda signaled no change in the Bank of Japan’s monetary policies.
As the yen strengthens, we are upgrading the yen to bullish in the short-term. Note that the currency is trading within a normal range, based on technical indicators on the daily chart.
As the yen strengthens, we are upgrading the yen to neutral. 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.