JPY: Japanese Yen is frustrated with the S&P forecasts

At the Forex currency market the Japanese Yen rate retreats in pairing with the USD on Wednesday, because bad forecast for the Japanese rating from S&P made investors feel frustrated. It is possible however, that “correction will be redeemed”: the USD is now even in the worse position.

Forex forecast: MACD indicator is in the positive area for the pair USD/JPY; it goes down and is ready to cross signal line from the top down and giving a pair sell signal. Stochastic Oscillator remains in the oversold zone today, giving a similar signal.

Forex recommendations: following upward correction it is possible that the pair USD/JPY will resume decline in the area of 81.45.

According to the data released this morning, international rating agency S&P has reduced prospects for Japanese AA rating to “negative” from the previous “stable”. In the follow- up comments observers of the agency explained that the process of rebuilding the country after the devastating earthquake and tsunami will only boost the public debt, which is already huge in the country.Some economists believe that Japan continues to suffer from poor management and evaluation of the earthquake in March may become the last straw for the government bonds market.

In addition it also became known that volume of retail sales in Japan fell by 8.5% y/y in March against the growth by 0.1% y/y in February. Yesterday’s data only confirms the negative status of the economy in the country of the Rising Sun: confidence in small business in Japan fell by 13.4 points in April, to the level of 36.1 points which became the lowest level since May, 2009, this is logically explained by the aftermath of the earthquake and tsunami in March.

Japan also considers the possibility of raising taxes to 15% of the sales tax from the current 10%. It became known earlier that surplus of trade balance amounted to Y196.5 billion in March against the level of Y931.94 billion a year earlier; tertiary index rose by 0.8% m/m in February against the fall by 0.1% in January - Japanese economy had really expanded, at least before the earthquake in March. Meanwhile, the level of export decreased by 2.2% y/y in March, while level of import increased by 11.9% y/y which is logical.

It became known at the beginning of the week, that the head of the Bank of Japan Mr. Shirakawa said that following the results in quarters I and II,  it can be expected that level of GDP will decline, due to the serious aftermath of the earthquake in March. He thinks that the main problem is the shutdown of the production facilities, which in any way or other is connected with the power failure. Shirakawa believes that as soon as the power supply will reach the level of 11 March, production capacity will be restored. At the same time Central Bank is still ready to take measures to support economy, if required.

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