Japanese Yen: policy urgency and mixed data – BNY

BNY’s Geoff Yu highlights Japanese Prime Minister Sanae Takaichi’s warning that Japan must build a strong economy now, rejecting claims that an economic blueprint drove the JGB selloff. He notes machinery orders weakness but a moderate recovery trend, alongside firmer tertiary activity, as domestic investment and competitiveness are framed as key to supporting the Japanese Yen.

Fiscal blueprint and capital spending signals

"Japan is making the urgent need to act explicit: Prime Minister Sanae Takaichi has warned that “if we don’t build a strong economy now, it will be too late.” The window to boost investment, wages and strategic capacity is narrowing."

"Japanese Prime Minister Sanae Takaichi has warned that if Japan does not build a strong economy now, it will be too late, pushing back against concerns that her government’s draft economic blueprint triggered the recent JGB selloff. Takaichi said that she saw no link between an unapproved government document and the market shock that drove bond yields to multi-decade highs, arguing that interest rates and FX moves reflect multiple factors, including U.S. rates and employment data."

"Japan’s machinery orders report for June showed a weaker reading m/m, although the basic assessment was left unchanged. Core private sector orders excluding ships and electricity fell 12.4% m/m after an 8.7% m/m increase in the prior month, marking the first decline in two months. The three-month moving average also remained negative at -4.8% m/m."

"Japan’s tertiary industry activity index rose 1.1% m/m, 1.5% y/y in May, indicating a firmer service sector backdrop. Broad-based personal services improved by 0.6% m/m, and business services gained 2.0% m/m. The main m/m contributors were information and communications (3.1% m/m, 2.0% y/y), finance and insurance (3.4% m/m, 13.7% y/y) and retail trade (1.9% m/m, 4.1% y/y), alongside gains in business-related services, leisure-related services, utilities and transport/postal activities."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)