JPY Daily News

Japanese Economy Once Again Faces the Threat of Deflation.

Yesterday, the JPY was up broadly on the unwind in carry trades, although traders noted that the Japanese currency does not respond as sharply to the moves in stocks as it did earlier in the year when any sharp equity slide would send the Yen flying higher.
By the end of yesterday's trading session, the JPY added 0.6% and closed at 109.41 vs. the USD. The big question now is whether it's the beginning of the carry trade unwind wave and a trend reversal for the Japanese currency or just another local correction.

Until yesterday, the JPY appreciated against the USD as U.S. financial shares dragged equity markets lower on persistent credit concerns, which prompted investors to reduce risk. The decline in the attractiveness of U.S. assets reduced demand for the dollars to buy them while simultaneously pushing investors into investments perceived as less risky, such as the Yen.

As usual, the move in the Japanese yen has little to do with Japanese fundamentals, and instead depends much more on broad risk appetite. This should continue to be the case during the rest of this week even though there will be heavy risk events on hands.
Today there is no news events expected from the Japanese market, however on Thursday the Japanese CPI, the Unemployment Rate and Retail Sales numbers will all hit the wires. The CPI numbers may not influence price action too much, but the indicator should be watched as the headline index is anticipated to hit decade highs due to energy and food costs, while the core measure may barely reflect positive price growth.

Indeed, once commodity prices start to fall back again, the Japanese economy will once again face the threat of deflation. Concerns about credit risks both in the United States and Japan are still strong and given the risk of recession in the country, traders will be looking for indications that the BoJ is considering reducing Interest Rates.

Current Time: 05/27 01:42 GMT

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