JPY: Rock and a hard place – Rabobank

By FXStreet Jane Foley, Research Analyst at Rabobank, suggests that true to its form as a safe haven currency the JPY lost ground overnight as the Shanghai Composite climbed higher.

Key Quotes

“In turn a softer yen lent some encouragement to Japanese exporters’ stocks although the performance of the Nikkei 225, which closed just 0.37% higher on the day, lacked conviction. Knocking confidence in the Japanese stock market was news that Japanese company profits fell -1.7% y/y in Q4 while sales dropped -2.7% y/y. Also disappointing was the smaller than expected 8.5% y/y rise in Japanese capital spending in Q4 and the release of softer manufacturing PMI data.

All of these releases suggest that despite the huge amount of stimulus already in the Japanese economy, it is failing to build traction. The immediate implication for Japan is that further stimulus could be required. The reality is that the BoJ appears to be running out of ammunition. The BoJ is already buying JGBs so that their amount outstanding will increase at an annual pace of about Y80 trn in addition to its purchases of ETFs, J-REITs, CP and corporate bonds. This sets the backdrop for the BoJ’s January announcement of negative interest rates. We would …read more

Source:: FX Street