JPY: Japanese Yen is getting slightly weaker

The Japanese Yen rate goes down slightly at the Forex currency market on Tuesday; however we have already witnessed the situation at a few sessions when currency’s weakness in the morning transformed into the full-blown consolidation.

Forex recommendations: in case of breakdown at the level of 80.10 the pair will go to 80.0 0 and 79.80. If downward breakdown does not take place, the pair will consolidate in the current range. 

It became known today that preliminary index of leading indicators rose by 3.7% m/m in April against he fall of 3.9% in March. In addition, preliminary index of coincident indicators grew by 0.3% m/m in April (-3.3% m/m in March). 

The head of the Bank of Japan Mr. Shirakawa said in the middle of the week that economy of the country is still under severe pressure and its recovery is expected in the second half of the fiscal year. According to him shortage in supply is decreasing faster than expected; however excessive focus on the level of business activity can lead to risks.Japanese statistics released last Tuesday showed that industrial output in Japan was favourable, however below the forecast. Unemployment rate increased to 4.7%. In addition, household spending continues to demonstrate negative dynamics.

As it was made public earlier, preliminary volume of retail sales in Japan reduced by 4.8% y/y in April against expectations of fall to -6.0% y/y; In addition, net CPI in Japan rose by 0.1% y/y in May against the increase of 0.2% in April. Japan has confronted with the rise in inflation for the first time over 28 months, which is crucial for the economy; however, it requires confirmation over the next few months. Japanese consumer prices grew by 0.6% y/y excluding food, and prices for utilities and food skyrocketed.

Observers from Moody's Investors Service said that revision of sovereign rating in Japan is quite possible: there is high probability that Japanese government will replace Prime-Minister (Prime Ministers have been in their jobs less than a year in the last four years, which increases the risk of delay in the implementation of the fiscal policy programs). The agency is going to review Japanese ratings of national and foreign currencies for possible downgrade. (Now it is Aa2).

Prime Minister of Japan Naoto Khan is going to resign as soon as reconstruction of the country after the earthquake will gain stability. Some markets have been discussing such possibility for some time already, while political forces demand Khan’s resignation.

 

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