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FOREX NEWS: USD/JPY Little Changed on Mixed Japanese Retail Trade Report

Robin Leung

FOREX NEWS: USD/JPY Little Changed on Mixed Japanese Retail Trade Report

The Takeaway: Japan retail trade came in just above expectation -> The modest, better-than-expected report fails to offset stimulus preoccupation -> USD/JPY little changed

The yen waslittle changed on the release of the mixed Japanese retail trade report for December, a direct gauge of consumption and consumer confidence. The year over year figure were released posting a 0.4 % increase – a cooler pace than the1.2% in previous reading, and beating expectation set for 0.3% growth. Meanwhile, the month over month figure were released posting 0.1%,up from a contraction of -0.1% in the previous reading. This was notably below expectations set for 0.4%.

The data shows that the Japanese may not be confident in the government policies and willing to spend in December. However the lackluster consumer consumption and sentiment may not be carried to 2013 when there is a dramatic change in the price level.Since JapanPrime Minister Shinzo Abe's unveiled the $117 Billion stimulus package and a 2% inflation target to battle deflation, the yen has weakened against the dollar. The stimulus package aims to ramp up the economy by boosting domestic consumption. But on the other hand, foreign goods could potentially become more expensive to buy. It remains uncertain how the Japanese consumption behavior would react to the changes in price level, as they have adapted to two decades of deflation.

Abe’s plan to achieve a 2.5% economic growth by weakening the yen may not go accordingly, as the weakening of the yen has started to post threats to some of its trading partners such as Korea, China, US, Thailand, Russia and Europe, especially when it came to technology and auto sectors. Recently, central bank of Taiwan and Korea both tried to curb gains on their currencies through verbal intervention. Looking ahead to the G20 meeting on March 6, market participants are expecting the aforementioned trading partners to give pressure to Japan government in an effort to avoid a competitive devaluation in currency. Therefore, trader should keep an eye on the G20 meeting for more direction guidance on yen.

The USD/JPY has showed a bullish trend since Sep 2012. Shortly after report is released, the USD/JPY rose 4.5 bps initially but then erased some of the gains, and at the time of this report, the USD/JPY rose 2.2 bps.

USDJPY_Little_Changed_on_Mixed_Japanese_Retail_Trade_Report_body_Picture_1.png, FOREX NEWS: USD/JPY Little Changed on Mixed Japanese Retail Trade Report

Charted Created by Robin Leung using Marketscope 2.0

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