USD/JPY Weekly Fundamental Analysis – April 18-22, 2016 -Forecast

The USD/JPY closed the week at 108.78 with the strength of the yen a main subject of discussion at the spring IMF meeting.  EconoTimes said that The International Monetary Fund, in its latest Word Economic Outlook report, considerably lowered Japan’s economic growth outlook to 0.5% from its earlier forecast of 1%. The IMF lowered the global growth forecast too; however, Japan’s growth outlook revision was the highest out of all the developed economies, noted DBS Bank. This was mainly because of weak demand from emerging nations and yen’s recent gain.

Market forecasts for the nation’s growth prospect for 2016 have also declined. According to Bloomberg’s recent survey, consensus projects Japanese economy to expand 0.5% this year, as compared with the initial forecast of 1.2%. The Bank of Japan forecasts the economy to expand 1.5% in FY2016; however, it is likely to lower its forecast during its meeting in April, according to DBS Bank.

For 2017, IMF forecasts Japanese economy to shrink 0.1% on the implementation of a 2ppt hike in consumption tax. Meanwhile, the Bank of Japan projects the economy to slow to 0.3% next year, also based on the implementation of hike in consumption tax. On the contrary, market consensus projects the Japanese economy to remain flat at 0.5% next year. Based on the final details of Japanese government’s fiscal reform plans, the nation’s growth prospect for 2017 face risks on both the upside and downside, added DBS Bank.

The BOJ is struggling to achieve its 2 percent inflation target, which is a key part of premier Shinzo Abe’s efforts to conclusively end a long phase of debilitating deflation.

Asked whether the G20 accord meant Japan won’t be constrained from intervening in the currency market to stem yen rises, Aso said: “The (exemption) applies broadly as there are various steps available on monetary policy and exchange rates.”

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Major Economic Events for the week:

Government Bond Auctions

Date Time       Country           Auction

Apr 18 11:00 Belgium Holds OLO auction

Apr 18 13:00 Norway Details of bond auction on Apr 20

Apr 20 11:05 Norway Holds bond auction

Apr 20 11:30 Germany Eur 4bn 0.5% Feb 2026 Bund

Apr 20 17:20 Italy Details of BTP€i auction

Apr 20 17:20 Sweden Details of bond auction on Apr 27

Apr 21 10:30 Spain Holds bond auction

Apr 21 11:03 Sweden Holds I/L bond auction

Apr 21 11:50 France Holds bond auction

Apr 21 19:00 US Holds 5-year TIPS auction

Apr 22 17:20 Italy Announces details bond auction