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Japanese Yen Rallies Amid Light Data Calendar

March 27, 2019 at 14:03 by Andrew Moran

Japanese coinsThe Japanese yen is trading higher against its most-traded currency rivals on Wednesday. With very little data coming out, investors are looking for other national trends to see how to trade the yen in the short-term. The economy could potentially face additional pressure on pledges to raise the sales tax, which also comes as a survey of executives finds that they anticipate a downturn by the fall.

Analysts are not anticipating data midweek, but they will look ahead to several important economic reports on Thursday, including the unemployment rate, retail sales, industrial output, and jobs-to-applications ratio. At the end of the week, construction orders and housing starts data will also be released.

On Wednesday, policymakers promised to hike the national sales tax from 8% to 10% in October, after the proposal was passed in a $915 billion federal budget for the next fiscal year, which begins April 1. The overall budget includes increased spending for defense, public works, and welfare.

It is unclear if Prime Minister Shinzo Abe and his Liberal Democratic government will decide to once again postpone the sale tax increase, especially considering that it is a politically unpopular idea. With the Japanese economy being in a vulnerable state, thanks to the US-China trade war and global economic uncertainty, many analysts warn that Tokyo would face significant pressure should the 2% jump be instituted. Plus, Abe’s government may face the consequences as the upper house elections take place this summer.

This comes as a new Nikkei study found that one-quarter of Japanese business leaders expect the global economy to slump in six months. This is up from 14% in December and is the worst reading since December 2016. Most of the survey respondents cited worsening conditions in China, though they are somewhat optimistic that the stimulus package could rejuvenate the world’s second-largest economy.

On Tuesday, the Bank of Japan (BOJ) attempted to ease investors’ minds by vowing to maintain its accommodative monetary policy:

In order to maintain the highly accommodative financial conditions, it is essential to persistently continue with the current monetary easing policy while taking account of developments in economic activity and prices as well as financial conditions in a balanced manner.

The USD/JPY currency pair tumbled 0.18% to 110.43, from an opening of 110.63, at 13:40 GMT on Wednesday. The EUR/JPY fell 0.28% to 124.29, from an opening of 124.63.

If you have any questions, comments, or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

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