FX fundamental analysis
a key production center for many Japanese manufacturers • last but not least the strength of the yen, which marked a record high when the dollar hit ¥75.31 in October, has made Japanese exports less competitive abroad and fueled a shiſt of production abroad: Japanese firms are lowering their export volumes expanding production to overseas locations and increasing outward-bound mergers and acquisitions
A large increase in fossil fuel imports for electricity generation was a key driver of higher import costs. Such imports jumped 25.2% to ¥21.8 trillion for the year, accounting for roughly a
third of the total value of all imports. Output of electricity from nuclear power has been declining sharply since the March nuclear plant accident in northern Japan, stoking the need for more fossil fuel to generate power. Overall, exports for the year fell 2.7% to ¥65.5 trillion, while imports rose 12.0% to ¥68.0 trillion.
BoJ surprises on the dovish side
On February 14th Bank of Japan managed to surprise the market both with a clarification of the inflation targeting and with the expansion of the Asset Purchasing Program (APP).
Previously the BOJ had defined price stability as between 0 and 2%.
It
now suggest 1% is the goal (for the record, Japan’s CPI has not risen by 1% in any year since 1997). Tus the Bank has committed more clearly to keeping the ongoing comprehensive monetary easing stance until the Bank judges to achieve the mid-point of the price stability goal of 1%. Te Bank of Japan (BoJ) had been adopting the soſt inflation targeting so far since October 2010. Still, the impression of embracing inflation targeting has become clearer by saying that it is a “goal” instead of “understanding”.
As far as the APP goes, the program
In a matter of weeks USD/JPY broke a multi- year
downtrend and
popular 55 and 100 days moving averages
60 FX TRADER MAGAZINE April - June 2012
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