• The week started with the end of a month (October) and then jumped over to a new month which is November 2016.
• This past week was full of activities for JPY ranging from low and medium to high impact news.
• Amongst them what I thought is important to share is the summary of the BOJ’s Monetary Policy Statement as well as the Outlook for economic activity and prices.
1.1 MONETARY POLICY STATEMENT.
• The nine (9) member Monetary Policy Board of the BOJ decided by a majority vote to set guidelines for market operations for the period between its meetings.
• These guidelines are:
(a) Yield Curve Control
• The bank will still apply the negative interest rate of -0.1% as it was expected and will also maintain the JGB yields at 0% for the short-term and long-term respectively.
(b) Assets purchase
• The board also decided with the same majority vote to purchase Exchange Traded Funds (ETF’s) and Japan Real Estate Investment Trusts (J-REITs) in order to increase their outstanding amounts. For more reading click here
1.2 NICHIGIN’S OUTLOOK FOR ECONOMIC ACTIVITY AND PRICES
• The bank sees the likelihood Japan’s economy growing until 2018.
• The bank will still continue with the concept of Qualitative and Quantitative Easing with Yield Curve Control (QQEWYCC) in order to realize a price stability target of 2%.
• Necessary policy adjustments will be done in reaction to economic developments as when the need arise.
• Production and exports have been slower as a result of slow growth in the emerging economies which affects Japan’s economy as well since it is highly dependent on theses exports.
• Business investment is expected to increase because of the Olympic Games related demand.
• The CPI’s forecast is to be slightly negative or around zero due to decline in energy prices.
• The bank is particularly concerned about the following:
(a) Developments in commodity exporting economies especially China as its competitor.
(b) Developments in the US economy and the impact of its monetary policy on global markets.
(c) The consequence of BREXIT.
(d) The issue of the European debt problem as well as the geopolitical risks.
• Business and household’s medium to long term growth expectations may be raised or lowered accordingly considering the factors which affect the GDP.
For more reading click here
• The next BOJ meeting is to be held on the 20 December 2016. To see schedule click here
• We also saw Toyota at the beginning of the week indicating that it has invested in a US car sharing service company called Getaround.
• This company is estimated to have more than 200 000 members
• This is a big boost to Japan since Toyota already has a partnership with Uber Technologies as well. For more reading click here
• This will influence the money supply between these two (2) economies.
2. TECHNICAL SUMMARY
• NIKKEI has end October with a range and then since the first day of the new month it has been falling until Friday (04/11/2016).
• This past week’s performance of the JPY against the following major currencies:
• JPY has been very strong against the USD from the first day of this month after the BOJ meeting and reports.
• It has been weaker than GBP by the close of the markets on Friday.
• It has been ranging against EURO.
• It has been very strong against CAD. This might be because of the oil prices that kept on falling this past week.
• It has been weak compared to the NZD.
• It has been weak but ended being stronger than the AUD.
• It has been ranging against the CHF.
• We can then summarize this by saying that the JPY has been generally stronger this past week and the Nikkei was weaker.
• This is also being supported by the COT Report below.
3. COT REPORT
• According to the latest COT report the number of short noncommercial positions relatively remain the same for the past two (2) weeks.
• It also shows that there has been a very slight decline of long positions even though there seems to be more long positions than shorts positions. To see positions click here