Japanese yen - JPY

The Japanese yen is the third-most traded currency in the world, according to a recent survey by the Bank for International Settlements. Specifically, the currency is involved in 11% of all foreign exchange trading. The yen is also unique as it is considered a safe haven asset - the currency strengthens during times of peril and weakens during strong economic booms. 


Daily update

The Japanese yen is currently weakening against all major currencies. Yesterday, the yen moved up sharply against the US dollar. Notably, trading volumes in yen futures accelerated for the third session in a row, rising above 30-day averages. The combination of continued strength in the yen and accelerating volumes suggest that traders bought the yen with conviction. Today's USD/JPY trading range is 111.50 - 114.50. 

As riskier assets such as equities and commodities rebound today, the yen appears to be weakening accordingly. Following a significant move higher in Chinese equity markets this morning, most US equity indices and commodities are strengthening. The S&P 500 is currently up by 0.5% while WTI (crude oil) prices are up by more than 1%. As as a safe haven currency, the yen tends to weaken in response to improving risk appetite. 

Turning to domestic economic data, year-over-year September inflation figures decelerated relative to the previous month. While domestic inflation was rising in late 2017, cost pressures appear to be running out of steam this year. Between a mixed outlook for growth and inflation that remains directionless, the Bank of Japan is less likely to signal tighter monetary policy in the near future. All else held equal, the continuation of the status quo is neutral for the yen. 

Lastly, Japanese Finance Minister Aso said that the US did not consider the country to be a currency manipulator. According to a Reuters story, Aso also stated that Japan-US trade talks are likely to begin in mid-January. While Trump's attempts to re-negotiate international trade arrangements have weighed on currencies such as the Mexican peso and the Canadian dollar in recent history, the Japanese yen has been unscathed so far. Our outlook on the yen remains neutral. 

USD/JPY is currently trading above 112.40. EUR/JPY is up slightly, and trading above 129.10. GBP/JPY is up slightly, and trading above 146.50.

Date Event Actual Previous
October 15 Reuters Tankan Index OCT 28 26
October 15 Capacity Utilization MoM AUG 2.2% -0.6%
October 15 Industrial Production YoY Final AUG 0.2% 2.2%
October 18 Balance of Trade SEP ¥140B ¥-438B
October 18 Exports YoY SEP -1.2% 6.6%
October 18 Foreign Bond Investment 13/OCT ¥1016.9B ¥-200.3B
October 18 Stock Investment by Foreigners 13/OCT ¥52.6B ¥1577.4B
October 18 Imports YoY SEP 7% 15.3%
October 19 Core Inflation Rate YoY SEP 1% 0.9%
October 19 Inflation Rate Ex-Food and Energy YoY SEP 0.4% 0.4%
October 19 Inflation Rate YoY SEP 1.2% 1.3%
October 19 BoJ Gov Kuroda Speech

Japanese yen Outlook




In our last commentary on the Japanese yen, we wrote that the currency was looking excessively weak against the euro. In particular, we stated that bullish catalysts driving EUR/JPY were at risk as speculator positioning in both long euro and short yen trades were looking extreme. In addition, we flagged changes to the Bank of Japan’s “yield curve control” program as a potential risk for yen stre…

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In early 2017, doubts regarding the integrity of the Eurozone led many to take refuge in the Japanese yen. Unlike the euro, the Japanese yen exhibits classic safe haven characteristics and tends to strengthen during downturns. Following the Brexit referendum vote and US presidential elections, few were willing to bet on opinion polls that predicted Macron’s victory. Similar to political events in…


Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

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