Japanese Yen Continues Appreciating Against the Dollar

Foreign investment in Japan stocks stood at a 212.7 billion yen deficit after registering a 228.7 billion surplus, while foreign bond investment stood at a 72.1 billion yen surplus, after registering a 1063.2 billion yen deficit.

Last week, the Japanese yen appreciated against the US dollar, gaining 1.25 percent and posting gains for the fourth consecutive week, closing at the 0.967300 level.

The yen has been favored by the recent weakness of the dollar, which lost 1.92 percent against a bundle of its main competitors. The victory of Joe Biden was priced in the markets, fueling risk appetite now that the White House appears to be in Democratic hands, while the Senate remains Republican.

The late appreciation of the yen concerns Japanese policymakers, highlighting the need to pay attention to this and understand how this could affect the Japanese economy’s performance.

Bank of Japan Governor Haruhiko Kuroda already announced that with Biden’s victory, the bank will pay close attention to the foreign exchange market and that it will work with the financial authorities to keep currency moves stable.

“It’s extremely important to keep exchange-rate moves stable,” he said.

The press also reported that a Japanese Finance Ministry official said that the ministry will keep monitoring the foreign exchange market developments.

On Monday last week, the Jibun Bank Manufacturing PMI was released, signaling a contraction in the sector at 48.7. This is an improvement from the previous month’s figure, which was at 48 and higher than the analysts’ expectations, which was 48.4.

On Tuesday, the Bank of Japan released the minutes of its September meeting. Some of the Bank of Japan’s governing board members supported the idea of continuing cooperation with the government. The members highlighted the uncertainty about the consequences of the pandemic as well as the magnitude of its domestic and overseas impact. They also agreed that global financial market tension is dwindling, despite the late high volatility in the stock markets.

So far, Japan has reported 107,086 coronavirus cases, as well as a death toll of 1,812. Cases are surging in places like the island of Hokkaido and in the urban prefecture of Kanagawa. In order to curb the spread of the virus, the Japanese government is pushing Japanese citizens to avoid closed spaces, close-contact settings and crowded places.

The bank also reported that the monetary base expanded by 16.3 percent in yearly terms, after gaining 14.3 percent in September.

On Thursday, the Ministry of Internal Affairs and Communications reported that overall house spending went down by 10.2 percent, after contracting by 6.9 percent in August. Labor Cash Earnings went down by 0.9 percent after contracting by 1.3 percent in the previous month and over the analysts’ expectations, who foresaw a 2.2 percent contraction.

The Jibun Bank Services Purchasing Managers Index, published by Markit Economics, signaled a contraction of the sector at 47.7, which is slower if we compare with the previous month’s figure, which stood at 46.9. Foreign investment in Japan stocks stood at a 212.7 billion yen deficit after registering a 228.7 billion surplus, while foreign bond investment stood at a 72.1 billion yen surplus, after registering a 1063.2 billion yen deficit.