Week in FX Asia – Despite Positive Japan Indicators Strong NFP Weakens Yen

JAPAN

• Japanese Household spending rose 7.2% in March. Quickest pace in 39 Years.
• US Non-farm payrolls released on Friday beat expectations. 288,000 new jobs added and unemployment rate dropped to 6.3%.
• TPP talks between US-Japan didn't take full advantage of Obama visit. Japan-US agreement crucial for full TPP approval.
• USD/JPY broke through 102.53 Resistance after NFP announcement.

Central banks around the world were slated to make an impact in the forex market this week. But all eyes would be on the US Non-farm payroll report on Friday. The Bank of Japan held rates and maintained its monetary policy. The central bank reaffirmed its commitment to reach the 2 percent inflation goal set down by Prime Minister Shinzo Abe.

The introduction of the new sales tax increase in April meant that consumers scrambled to increase purchases before it was in effect. An increase from 5% to 8% resulted in higher sales. Retail sales jumped 11% in March. There are criticisms that the sales tax might complicate the inflation target, but the central bank has said that the economy was strong enough to weather any fallout from the tax hike.

The confidence seen by the BOJ in reaching the inflation target means that changes to the monetary policy are not coming as the central bank feels the economy is doing fine on its own. Critics of Abenomics feel that not enough has been made in the trade front as the TPP talks with the US have stalled. Wage rises have shown promise as both large and small enterprises have started to announce raises. So far the monetary policy arrow from Abenomics seems to be on target so its bad news that there will be no doubling down on what has worked so well for Japan even as the other two arrows (reform and fiscal changes) have shown little in way of results.

The USD/JPY continues to reach towards the 103 level after some setbacks earlier in the week. The uncertainty caused by the Bank of Japan, the US Federal Reserve and the US Non-farm payrolls in the same week gave some volatility to the currency pair. The two central banks did not surprise both sticking to their announced monetary policies which in tandem will result in further JPY weakness. The employment figure further cemented the move as the print beat expectations giving no indication that the Fed will change its course towards a potential rate hike in 2015, six months after it ends its tapering in fall of 2014.

Japan March Household Spending Rises 7.2 Percent in March – MarketPulse

• Japanese PM Aims to Reform Corporate Tax To Attract Foreign Investment – MarketPulse
• Abe Wants to Wrap Japan-EU Trade By End of 2015 – MarketPulse
• Japan Jobs Market Shouldn't be Ignored – MarketPulse
• Australia and Japan Lead Asian Equities Lower – MarketPulse
• Australia New Homes Sales Climb Strongly – MarketPulse
• Asian Equities Mixed with Eyes on U.S. Jobs Data – MarketPulse
• Australia Looking to Address Growing Debt – MarketPulse
• PM Abe: Wages and Employment Key to Beat Deflation – MarketPulse
• Japan Car Sales Decline – MarketPulse
• Nikkei Rallies with Asian Equities Mixed – MarketPulse
• Less Chance of Monetary Easing from BOJ This Year – MarketPulse
• China's Factory Activity Picks Up in April – MarketPulse
• Japan Industrial Output Rises 0.3 Percent in March – MarketPulse
• Bank of Japan Reaffirms 2 Percent Inflation Target – MarketPulse
• Japanese Poll Says Half of Firms See Recovery Next Quarter – MarketPulse
• Bank of Japan Cuts GDP Forecast – MarketPulse
• BOJ Sees 2.1% CPI Rise in FY Ending March 2017 – MarketPulse
• BOJ Keeps Monetary Policy Steady – MarketPulse
• Japan To Promote Government Bonds Abroad – MarketPulse
• US-Japan Meetings To Take Place Before All TPP Talks – MarketPulse
• Singapore Benefits from Yuan Market – MarketPulse