We know from last week’s price action that yen pairs can take cues from Japan’s economic reports. Which ones should you watch out for this week?
BOJ’s meeting minutes (Mar 20, Asian session)
As expected, the Bank of Japan (BOJ) kept its policies steady for another month in March. And as expected, Governor Kuroda and his gang had cut their estimates related to exports and output.
The central bank cited U.S. protectionist policies, Brexit uncertainty, and developments in emerging and export-dependent economies as reasons why exports are now showing weakness and are not “increasing as a trend” as they shared before.
This week we might get clues on how worried central bank members are over their downgrades in the export and output sector. Remember that Japan’s economy depends heavily on its machineries exports, so these types of pessimism will likely be a BFD for Kuroda and his team.
CPI reports (Mar 21, 11:30 pm GMT)
For newbies out there, you should know that it’s been over SIX YEARS since the BOJ stepped up its inflation target from an annualized rate of 1.0% to 2.0%.
Fast forward to today and it doesn’t look like the bajillions that the central bank has showered on the economy have done anything to further the BOJ’s inflation goal.
This week, analysts expect to see the annualized national consumer price index (CPI) jump by another 0.4% for the month of February. Ditto for the core figure, which is expected to maintain its 0.8% reading.
A much lower than expected release could put the pressure on the BOJ to get creative with its policies. On the other hand, a much healthier consumer price growth would give the central bank room to hold its policies until the additional sales tax kicks in later this year.
Flash manufacturing PMI (Mar 22, 12:30 am GMT)
Did BOJ members have cause to be more pessimistic about Japan’s export and output situation? We’ll know more this week when the flash manufacturing PMI is released.
Market players are betting on an improvement from 48.9 to 49.2 for the month of March. If you recall, the index dipped below the 50.0 expansionary territory earlier this year.
If we see significant downgrades, then the yen could take some intraday hits against its major counterparts. But if March’s figures come in much better than expected, then the yen could gain a pip or two (or twenty) until another catalyst moves the low-yielding currency around.
Missed last week’s price action? Read JPY’s price recap for March 11 – 15!