Good morning. I just wanted to drop a few observations about the Japanese data that was released this morning. People have been asking me about it since there has not been a pronounced market reaction. I felt it would be best to address it here rather than cover it in many different messages. So keeping it as short and simple as possible:
1.) House hold spending posted a significant decline (disappointing for expectations for a modest gain.)
2.) Inflation was flat.
3.) Unemployment decreased (the only positive).
4.) The US is on holiday.
This in combination with the two facts will put pressure on the BOJ to do more.
1.) The economy is in a recession with a contracting GDP (in contrast to the rest of the world.)
2.) The BOJ admitted in minutes released on Tuesday that they are concerned inflation is failing to meet their targets.
The JPY has benefited this week from political turmoil that has resulted in a bid tone for the yen and a relatively quiet end of the week due to the US holidays. This is the limitation of the positives in its favour and effectively, the currency remains fundamentally week. It is highly likely to give up its gains (as modest as they are) of the last few days at the first opportunity. I remain bullish on the USDJPY at this point and see no reason to change my views.