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Japanese Yen Weakens on Slide in Machine Tool Orders, Bump in PPI

January 16, 2020 at 17:55 by Andrew Moran

1,000-yen banknotesThe Japanese yen is weakening against most of its currency rivals on Thursday after a mix of economic data that highlighted both gains and weaknesses in the world’s third-largest economy. Is the federal government’s stimulus enough to prevent Tokyo from slipping into the long-awaited recession?

According to the Japan Machine Tool Builders Association (JMTBA), machine tool orders plummeted 33.6% in December from the same time a year ago. This is a slight improvement from the 37.9% drop in the previous month. Machinery orders surged at a record pace of 18% in November, up from the 6% slide in October. This lifts the 12-month rate from -6.1% to 5.3%.

With the global economy seemingly bottoming out, as some market observers say, then orders for Japan’s machine orders may have bottomed out as well.

Overall, the Reuters Tankan Index, a measurement of manufacturing activity in Japan, clocked in at -6 in January. This is unchanged from December and represents the sixth consecutive month the index has been in contraction territory.

In other data, the producer price index (PPI) edged up 0.1% last month, bringing the year-on-year increase to 0.9%. Both numbers are in line with what the market had projected.

Earlier this week, the Bank of Japan (BoJ) reported that bank lending advanced 1.8% in December. The Cabinet Office, meanwhile, released the results of its Economy Watchers Survey, and the reading was 39.8 in December, a slight jump from the 39.4 in November. The monthly survey continues to be below the 18-year average of 44.97.

Next on the data front will be industrial figures and investment data for December.

Late last year, Tokyo announced a $120 billion stimulus plan, and the early indicators suggest that it appears to be spurring growth in the key industrial and manufacturing sectors. However, some analysts are anticipating capital goods shipments will come in lower in the fourth quarter and quarter-on-quarter non-residential investment will post a 2.3% drop in the October-to-December period

The USD/JPY currency pair rose 0.23% to 110.15, from an opening of 109.90, at 16:45 GMT on Thursday. The EUR/JPY advanced 0.13% to 122.67, from an opening of 122.54.

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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