Japanese Yen Loses Gains Despite Positive Domestic Fundamentals

For a while today, the Japanese yen was one of the strongest currencies on the Forex market, opening sharply higher against its rivals. But by now it has lost gains against all of its major peers despite the positive outlook for Japan’s economy. Domestic macroeconomic data was not especially good, though.
The Bank of Japan reported that lending by Japanese banks increased by 2.3% in June from the previous year, while market participants were counting on the same 2.6% rate of growth as in the previous month. Japan’s Cabinet Office reported that core machinery orders dropped 7.8% in May from the previous month, whereas markets were anticipating a much smaller drop by 3.6%. The current account reported by the Ministry of Finance logged a surplus of Â¥1.31 trillion in May. While it was a decrease from April’s excess of Â¥1.6 trillion, the surplus was still bigger than Â¥1.24 trillion predicted by economists.
Yet according to the Regional Economic Report released by the BoJ today, Japan’s economy was feeling pretty well, though the threat of trade wars led to worries:

According to assessments from regions across Japan, all nine regions reported that their economy had been either expanding or recovering. The background to this was that domestic demand had continued on an uptrend, with a virtuous cycle from income to spending operating in both the corporate and household sectors, although exports and production had been affected by the slowdown in overseas economies.

Compared with the previous assessment in April 2019, all nine regions reported that their assessments were unchanged. However, a somewhat increasing number of firms were pointing to heightening uncertainties over the outlook for overseas economies and their impacts, reflecting, for example, the U.S.-China trade friction.

Indeed, BoJ Governor Haruhiko Kuroda said today that he expects Japan’s economy to continue its moderate expansion and gradual movement towards the central bank’s 2% inflation target. Kuroda also stated that the central bank is going to take actions to support economic growth:

The BOJ will make necessary policy adjustments to sustain the economy’s momentum towards achieving its inflation target

USD/JPY gained from 108.43 to 108.59 as of 12:17 GMT today, rebounding from the daily low of 108.28. EUR/JPY went up from 121.61 to 121.78. JPY/CHF rose from 109.24 to 109.45 after closing at 109.36 on Friday.

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