JPY: Japanese Yen is growing amid general risk aversion

The rate of the Japanese Yen continues to grow at the Forex currency on Tuesday- however the JPY is pushed upward only due to the investors’ risk aversion amid the information about radioactivity threat at Japanese nuclear power stations which has been spread in the markets. In this regard the Yen is gaining popularity again –but only as a safe currency.

Forex forecast: MACD indicator is in the positive area for the pair USD/JPY and is going up maintaining a pair buy signal. Stochastic Oscillator goes down in the neutral zone today, giving a pair sell signal.

Forex recommendations: for those who wish to take risk – in case of breakdown at the level of 83.80 the pair will go to 83.50 and 83.40. For the others: off the market.

As noted in the minutes of the meeting of the Bank of Japan of 14 March released today, the earthquake of 11 March and subsequent devastating tsunami had a significant impact on the Japanese economy. Members of the Monetary Committee have agreed to continue soft policy and mitigate it further as soon as possible. The Bank of Japan expects deterioration in sentiments both within large companies, production and households. 
In addition the head of the regulator Mr. Shirakawa noted today that Japanese economy had declined in exactly the same way after the collapse of Lehman Brothers.

Statistics released on Monday showed that volume of orders for the basic production equipment in Japan reduced by 2.3% m/m  in February for the first time over the last three months while a month earlier the index had increased by 4.2%. The indicator gives an idea about the amount of capital investments in production sector for the next 3-6 months. Thus, continuation of companies’ cost reduction threatens to the Japanese economy in addition to the fact that the situation in the business sector has already been too hard after the series of earthquakes and tsunamis.

Statistics released earlier was positive (unemployment rate amounted to 4.6% in February, not revised; balance of current account increased by 3.0% y/y in February against the fall by 47.6% in January; level of import increased by 3.3% y/y, export rose by 4.1% y/y).

Last week the Bank of Japan decided to keep interest rate unchanged at the previous level of 0-0.1% which is the absolute minimum. According to the statement of the regulator, national economy remains under severe downward pressure which will be preserved. Later it is expected to revert to moderate recovery later. Growth of interest rate is not expected until mid 2012 according to observers and economic stimulus program will run for at least the next 6 months.

The situation in Japan remains tense: after the next series of tremors when one more nuclear power station is under threat of devastation, the situation in the country is far from being stable. According to police departments, three prefectures are being affected by the disaster the most severely: Miyagi (8017 thousand people killed) Iwate (3811 people); Fukusima (1226 people). News about tremors of various magnitudes is still received today.

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