• EURCHF popped on Japanese banks’ purchases
  • Japanese inflation remains mediocre, other data better
  • Japan’s defence minister steps down

There was a bunch of macroeconomic data from the Japanese economy overnight. Nevertheless, before we move to analyze it, let’s have a look what happened with the EURCHF during the Asian session. That large move on the pair was related to an increase in a demand on EUR by Japanese banks for their daily requirements, according to Bloomberg.

link do file download linkThe EURCHF popped as much as 75 pips on an increase in a demand on EUR by Japanese banks. Source: xStation5

As for now, the Swiss currency remains the worst performing in G10. That scheme took place in the past two days. A rush in selling the CHF could stem partly from the SNB’s meddling in the FX market as the central bank warned a few days ago that the CHF was getting more overvalued. Possible interventions might be the most likely as the Japanese yen is the strongest currency at the same time, hence it cannot be related to risk-off.

Now, let’s whip through the Japanese data which was quite mixed, on balance, slightly JPY-positive. First and foremost, inflation readings were more or less in line with expectations, it means there are a long way off the BoJ’s objective. National CPI came in at 0.4% yoy (cons. 0.4% yoy), core CPI stripping out fresh food amounted to the same value which was consistent with the forecast, whereas ’super-core’ gauge which excludes fresh food and energy prices turned out to be flat, against the estimation at -0.1% yoy.

link do file download linkJapanese inflation trends remain lackluster and they are far away from the BoJ’s inflation goal. Source: Bloomberg

Besides, regional inflation metrics from Tokyo were released as well, the data was for July unlike the national prints being for June. Tokyo’s CPI was at 0.1% yoy, in line with expectations while core CPI (ex. fresh food) picked up 0.2% yoy slightly beating the consensus at 0.1% yoy. At the end, ’super-core’ CPI (ex. fresh food and energy) slipped -0.1% yoy which was expected though.

link do file download linkJapan’s retail sales missed expectations both in monthly and annual basis. Source: Bloomberg

Moving on, Japanese retail sales for June came in at 0.2% mom and 2.1% yoy while the consensuses indicated 0.4% mom and 2.4% yoy respectively. On the other hand, when we weigh retail sales against the services PMI one could assume better performance in the nearest future as the PMI points to an increase. Moreover, household spending rose 2.3% yoy in June against the forecast at 0.5% yoy.

The brightest data came in from the labor market as the jobless rate decreased to 2.8% from 3.1%, much better than the estimation suggesting a fall just towards 3%. Furthermore, the job to applicant indicator moved up from 1.49 to 1.51 indicating the labor market is getting tighter. Having said that, wage growth stays low hovering around 0%.

link do file download linkThe Japanese unemployment rate slid in June, however wage growth remains muffled. Source: Bloomberg

In addition, the “Summary of Opinions” from Jule’s BoJ meeting took place as well which is treated as the preview ahead of the minutes. The most important issues are as follows:

  • it should set a new JGB target at 45tln JPY and then reduce it
  • 10Y yield target range should not be taken so strictly

Both remarks could be seen JPY-positive as they suggest policymakers could be concerned about a possible scarcity on the bond market. At the end of the day, Japanese defence minister Inada stepped down from her position. PM Abe announced that foreign minister Ishida would add defence to his responsibilities.

link do file download linkThe USDJPY is walking a tightrope between a downward and an upper limit of a triangle formation. If the pair breaks one of them, it could lead to an acceleration of a move. Source: xStation5