Japanese Yen Gains On U.S. Debt Concerns And Economy Minister Akira Amari’s Comments

January 15, 2013 in Forex Fundamentals and News

Japanese Economy Minister Akira AmariTokyo: Japan’s economy minister Akira Amari commented today that Japan will not put efforts for weakening the yen further. This comment came 6 days after the Japanese Finance Minister Mr. Taro Aso had mentioned about Japan’s plans to use the foreign exchange reserves to buy bonds issued by the European Stability Mechanism (ESM) and euro-area sovereigns to weaken the Japanese Yen. Mr. Aso’s had briefed the reporters about this matter on January 8, 2013.

While a weak yen is good for Japanese exports which have suffered a lot with yen getting continuously stronger, any drastic weakening is bad for cost of imports which increases the manufacturing cost. Japanese yen had touched 75.36 level which is the post world war low. Exports have taken a hit because of the recent disputes with China about the ownership of the uninhibited islands in the East China sea.

Economy Minister Akira Amari said Japan faces risks from declines in the yen as the import costs go high. Japan’s imports have been rising and the budget deficit has been increasing drastically. The average imports of Japan during 1979 to 2012 has been 3398.6 billion Yen. The estimates for Japanese imports during 2012 are for JPY 5875.75 billion yen. With 32% of the total Japanese imports Fuel has the lion’s share. The growing dependency on Fuel to generate power because of  the shutdown of Nuclear power plants and the increasing cost of Fuel imports is also an issue.

A drastically weak yen also brings bearish sentiments about Japanese economy and affect the foreign investment in the country.

US dollar - Japanese yenJapanese Yen in today’s Asian session

USD/JPY had reached as high as 89.54 during today’s Asian session. It was the first time since July 2010 when USD/JPY moved above 89.00 level. It fell strongly to 88.62 from there.

The fall of Japanese yen came after Economy Minister Akira Amari’s comments but in the background the debt crisis issues of U.S. are also putting a negative pressure on US$ strength.

Today’s important economic releases

Economic releases scheduled from U.S.

1) Producer Price Index: The PPI data is scheduled for GMT 13:30 today. The previous year on year change in the producer price index was 1.5%. The consensus is that today’s release will see a drop to 1.4%. The previous change in the producer price index was 2.2% and a drop to 2.1% is expected in that too.

2) Retail Sales: A drop in month on month retail sales of December from previous 0.3% to 0.2% is being expected by the economist in the release scheduled at GMT 13:30 today.

3) Business Inventories: November’s business inventory report is scheduled today at GMT 15:00. October’s data had shown a figure of 0.4%, the consensus is for a drop to 0.3%.

Economic releases scheduled from Japan

1) Machinery Orders: The data is scheduled for GMT 13:30 today. The previous year on year change in the machinery orders was 1.2%. The consensus is that today’s release will see a sharp drop to -6.5%. According to the consensus of economists a drop is also expected in the month on month change of machinery orders from previous 2.6% to 0.3%. Today’s release will show the November data.


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