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The Japanese yen is still suffering from the Japanese policies

Discussion in 'Current Market Sentiments' started by fx-recommends, Apr 9, 2015.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    USDJPY could get back its bullish tone easily getting place above 120 level, as there were no changes of BOJ's Chief Kuroda's views during yesterday press conference.
    Kuroda has downplayed the estimations of adding more stimulus measurements in Apr. 30 but he did not rule out adding more steps later.
    While the markets are preparing now for watching the new inflation rates, after this April when the impact of raising of the sales taxes in the beginning of last April 2014 by 3% is to be eliminated.
    Kuroda has said previously that he doesn't rule out the possibility of inflation falling again below zero, after April.
    Kuroda has said yesterday that the inflation outlook remain low but he has shown the same optimism about reaching BOJ's 2% inflation yearly goal, despite the negative impact of the oil prices slide which is seen fading soon, as he has indicated higher inflation rate to come with rising of the wages in Japan.
    While the recent inflation data which have come out from Japan have shown continued decelerating can open the way for further stimulus measurements, after April with the current low oil prices, while we are still watching struggling consuming spending in Japan as a result of raising the sales levy by 3% last April could not be eliminated yet.
    The Overall Household Spending in Japan has fallen the yearly falling number 11 in a row by 2.9 % in February, While Feb National CPI ex fresh foods which is the favorite gauge of inflation to BOJ have come previously showing the yearly decelerating number 7 in a row by rising by only 2% yearly.
    Due to the slide of the oil prices, BOJ has actually lowered its inflation forecast of the current new financial year to be only 1%, after it had been expecting 1.7%.
    But it maintained the option of widening its monetary base further for reaching its yearly 2% inflation target even after it had already widened its monetary base to Yen80tr yearly by the end of last October causing more pressure on the Japanese yen.
    The Japanese government which was planning for hiking the sales tax further by 2% to reach 10% next October has delayed that adding 18 months and also it has unfolded a stimulating plan worth ¥3.5tr by the end of last year getting use of the falling of the energy prices which lower the pressure on its budget.
    Abe’s Cabinet has managed to start raising the sales taxes last April for improving the financial situation of Japan, after several governmental packages for stimulating the Japanese economy financially during the deflation spiral which continued for more than 15 years, after a previous consumption tax hiking in 1997 had prompted depression start in 1998.
    Japan is having now the biggest debt to GDP ratio among the G7 reaching 211% in 2012, after 4 consecutive yearly rising following the credit crunch in US and even with last April raising of sales tax by 3%, it is not foreseeable to see this percentage getting down in the next few years and it is expected to see rising to 240% in the last financial year.
    While it looks that BOJ or even the Japanese government cannot have until now the patience to wait and see for a reliable period of time causing continued pressure on the Japanese yen.
    While the Fed is still painting gloomy picture about the interest rate outlook using 50% models to express about it in the published minutes of the FOMC last meeting on last Mar. 18 showing that the US equities can have longer support by the Fed's accommodative policy.

    Kind Regards
    FX Market Strategist
    Walid Salah El Din
    Mob: +20 12 2465 9143
    E-Mail: mail@fx-recommends.com

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