USD/JPY Fundamental Forecast – September 12, 2016

The USD/JPY tumbled 42 points to trade at 102.06 after a lot of secondary data releases that disappointed markets. Japanese Tertiary Industrial Activity tumbled to 0.3%.  the Bank of Japan said that the M2 money stock in Japan was up 3.3 percent on year in August, coming in at 942.0 trillion yen. That was in line with expectations and unchanged from the July reading.

Japan’s economy barely grew in the second quarter, revised data showed Thursday, further calling into question Prime Minister Shinzo Abe’s big-spending easy-money policy drive.

The figures were a slight improvement on the zero expansion in earlier estimates — owing to an upward revision in capital spending and public investment — but they were still well below the previous three months’ figures. And analysts were cool on the prospects for future growth in the world’s No. 3 economy.

“It’s getting better but the economy is lacking a growth engine and overall the outlook is pretty bleak,” said Kohei Iwahara, a Japan economist at French bank Natixis. “There may be some growth in the third quarter but nothing exciting — I’m not optimistic.”

Japanese leaders have struggled to get a strong handle on the economy, which contracted in the last three months of 2015, before bouncing back in January-March with a 0.5-percent rise on-quarter and 2.1 percent annualized.

Investors tend to buy Japan’s currency as a safe bet in times of turmoil or uncertainty. But it makes exporters less competitive overseas and hits their profits.

The problem was highlighted recently as many of the county’s best-known firms, including Sony and Toyota, reported lower profits in the three months to June.

Japan’s latest figures will throw the spotlight on the central bank, which meets later this month, as markets try to guess if it will launch more economic stimulus.

Bank of Japan policymakers disappointed at its late July meeting when they opted to leave a record 80 trillion yen annual bond-buying program unchanged, worrying that expanding the scheme could spark volatility in debt markets.

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Upcoming Economic Events that you should be monitoring:

 September 12, 2016

Government Bond Auctions

Date Time Country Auction

Sep 12 11:30 Germany Eur 2bn Mar 2017 Bubill

Sep 12 13:00 Norway Details of bond auction on Sep 14

Sep 13 11:00 Netherlands Eur 2-3bn 0% Jan 2022 DSL

Sep 13 11:10 Italy Holds bond auction

Sep 14 11:05 Norway Holds bond auction

Sep 14 11:30 UK 0.125% 2046 I/L Gilt

Sep 14 11:30 Germany Eur 1bn 2.5% Jul 2044 Bund

Sep 15 10:30 Spain Holds bond auction

Sep 15 11:03 Sweden Holds I/L bond auction

Sep 15 11:50 France Holds bond auction