Yen advances sharply on Kuroda first press conference

March 21, 2013 in Forex Analysis

21 March 2013 – Today’s highlight on the Japanese economic scene is the first press conference of the newly elected BOJ Governor Haruhiko Kuroda, being held at the moment. The Japanese currency is experiencing a sharp increase, trading at $95.45 at the time of writing.

Earlier today, the yen climbed modestly against the dollar, trimming its overnight losses as the country’s Ministry of Finance posted a narrower trade deficit gap for February.

The better-than-expected results pushed the Japanese currency a bit higher, trading at around $95.76 in early Thursday, up 0.2% from its yesterday’s low of $96.05.

Despite the figure being colored in green, the report showed a trade deficit for eighth consecutive month, making it the longest stretch of poor trade performance from Japan in more than 30 years. Data revealed that exports dropped by 2.9% for February, much worse than the forecasted 1.9%, while imports increased by 11.9% thus generating an overall trade deficit of -777.5bn yen ($8.1bn, £5.3bn).

This adds up to the challenge faced by the Japanese government in its attempts to battle deflation and spur the economy as exports are one of the main driving forces in the country’s growth.

In order to make Japanese goods more affordable on the foreign market and boost exports, the country’s government has pressed more aggressively on weakening the yen, resulting in nearly 20% depreciation against the dollar since November.

Analysts commented that a weak yen has made many Japanese manufacturers moving production overseas, while at the same time demand for the Japanese goods, particularly in key market places as Europe and China, has been dropping.

According to them, Japanese exports will not experience a strong recovery in the near term, regardless of yen’s weakening and the trade deficit is likely to continue for the near time as well.

Investors will watch very closely the new BOJ governor actions as he is particularly vocal advocate of more aggressive easing measures when necessary, which is in line with the position of the Japanese government.




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