USD/JPY: Fundamental Economic Analysis for Fri 8/4/23The recent decline in the value of the Japanese yen against the US dollar was halted at around 142.5 to the dollar as investors continued to assess the impact of the Bank of Japan's policy adjustment after it loosened its grip on interest rates and allowed the yield on 10-year Japanese government bonds to climb above the upper limit of 0.5%. Recently, the Bank of Japan allowed the yield on 10-year Japanese government bonds to go over the previous maximum of 0.5%. The Bank of Japan (BOJ) did not change its policy interest rates at its July meeting but did take steps toward more adaptable yield curve management. This was seen as a warning that it would not rigidly uphold the 0.5% maximum limit on the 10-year yield. If the Bank of Japan (BOJ) were to take an unexpected step for the first time since Governor Kazuo Ueda assumed office, it would likely promote wagering on the continuation of policy normalization. For months, investors have speculated that Japan's central bank, the only major one to adopt a dovish stance, could cave in the face of mounting pressure on the country's bond yields and currency from persistent inflation and rising global interest rates. Rising global interest rates have put pressure on Japanese yen and bond yields, leading to this conjecture. Following a credit rating downgrade in the United States and a major run-up in rates on United States Treasury securities, a wave of risk-off emotion swept through the market, sending the Nikkei 225 Index and the wider Topix Index down by week's end. Both the Nikkei 225 and the Topix Index rose on Friday, with the former ending the day at 32,193.3 and the latter at 2,275. Investors kept an eye on the yen and JGB rates while the Bank of Japan convened the previous week and made adjustments to the policy that governs the yield curve. Major components of the Nikkei 225 index posted gains on Friday, including Nippon Yusen (3.1%), Toyota Motor (1.3%), Mitsubishi UFJ (1.8%), SoftBank Group (0.7%), and Nippon Steel (1%). Meanwhile, despite reporting higher sales and operating profit for the second quarter, Nintendo's stock fell 2.9%. Sales at Keyence were down 0.4%, at Renesas Electronics they were down 4%, and at Fast Retailing they were down 0.3%. Following a credit rating downgrade in the United States and a major run-up in rates on United States Treasury securities, a wave of risk-off emotion swept through the market, sending the Nikkei 225 Index and the wider Topix Index down by week's end. Both the Nikkei 225 and the Topix Index rose on Friday, with the former ending the day at 32,193.3 and the latter at 2,275. Investors kept an eye on the yen and JGB rates while the Bank of Japan convened the previous week and made adjustments to the policy that governs the yield curve. Major components of the Nikkei 225 index posted gains on Friday, including Nippon Yusen (3.1%), Toyota Motor (1.3%), Mitsubishi UFJ (1.8%), SoftBank Group (0.7%), and Nippon Steel (1%). Meanwhile, despite reporting higher sales and operating profit for the second quarter, Nintendo's stock fell 2.9%. Sales at Keyence were down 0.4%, at Renesas Electronics they were down 4%, and at Fast Retailing they were down 0.3%. The final June Au Jibun Bank Japan Services PMI reading was 54.0, up from the flash print of 53.9. The indicator stood at 53.8 in July of 2023. Despite the services sector expanding for 11 straight months, the most recent figure was the worst since January. This was because new orders grew at their slowest pace in six months, while employment fell after rising for five months straight. For the first time in a year, the total amount of outstanding business fell, with the rate of fall being modest but the fastest seen since April 2022. The quantity of unpaid invoices has dropped for the first time ever. Meanwhile, demand from outside rose at one of the fastest rates recorded during the period, reflecting sustained overseas demand for travel and tourism. For the first time in three months, inflation had a role in driving up operational costs. Energy, fuel, raw materials, and wages might all have played a role in this increase. In conclusion, confidence did not decrease; nevertheless, optimism did fall to its lowest position in five months. The article cites Markit Economics as its reference.
Final June 2023 Au Jibun Bank Japan Manufacturing PMI reading of 49.8 was below July 2023's revised reading of 49.6. The initial July 2023 flash reading was 49.4, however this was amended up to 49.6. Even while output and new orders have both been falling by small amounts, the most recent report indicated that industrial activity has contracted for the sixth time this year. For the sixth time since the new year began, manufacturing output fell. This was the slowest monthly decline in international sales in the previous nine months, despite the fact that international sales had dropped for the seventeenth straight month. The labor force has increased for the 28th consecutive month, and although job queues have been shrinking for the last 10 months, the pace of decline has slowed to its lowest point since October 2022. The current contractionary cycle was also stretched by one year due to the volume of purchases. The cost side had some of the smaller rises in input prices since February 2021, and the overall increase was about in line with the long-term average for the series. While the overall inflation rate remained high, the charged-price inflation was constant after hitting a 21-month low in June. With higher hopes for further demand improvement and the launch of novel new items, confidence is at its best point in the previous year and a half. The reference is to markit economics. ( The Au Jibun Bank Japan Manufacturing PMI is compiled by S&P Global from monthly survey responses from purchasing managers at a panel of more than 400 companies. The Japanese location of these buying managers. The flagship statistic is the Purchasing Managers' Index (PMI), which is a weighted average of the following five indices. Here are the relevant measurements: Incoming Orders (30%), Production (25%), Staffing (20%), Vendor Turnaround (15%), and Inventory (10%). The Suppliers' Delivery Times Index is inverted to make the PMI calculation easier. Because of this, its movements will be in sync with the other indexes. (The index may take on values between 0 and 100; any value over 50 implies expansion over the prior month, while any value below 50 suggests contraction.)
In June 2023, Japan's unemployment rate declined to 2.5% from 2.6% in the previous month, which was in accordance with predictions made by market experts. The unemployment rate fell to its lowest level since January, with the number of unemployed falling to 1.73 million and the number of employed rising by 191,000 to 67.55 million. A total of 69.27 million Americans are now actively engaged in the labor force, up by 144,000 from a year ago, while the number of individuals not working fell by 60,000 to 40.98 million. The percentage of the population actively looking for work rose to 63.1% in June from 63.0% in the same month a year ago. The impact of seasons on this growth is unknown. The unemployment rate was 2.6% a year ago when we last checked. Meanwhile, in June, there were 1.30 job openings for every 1.31 job seekers, a decrease from May's 1.31 to 1.30. Since July of 2022, this is the lowest it has been. Initially, this information came from the Ministry of Internal Affairs and Communications. ( The spot exchange rate indicates the current value of one currency, in this case the US Dollar (USD), in reference to another, in this case the Japanese Yen (JPY). As opposed to the USDJPY forward rate, which is quoted and exchanged on the same day but delivered and paid for at a later date, the USDJPY spot exchange rate is quoted and exchanged on the same day. )
Taylor Norboge wrote and published this article on August 4, 2023 at 13:46 UTC.
