After the successive lost of the Japanese yen, the currency may not still recover and stay uptrend against majors, although the data on household spending and unemployment could have sent a positive vibe for its future path.The currency remained to be volatile in the session earlier.
The talked-about strength of the yen caught the attention of the traders before as the Japanese officials were seen to be reluctant in implementing necessary measures to address the concern. As the greenback regained its strength, the Japanese authorities eventually lost the enthusiasm to act.
Recently, Prime Minister Shinzo Abe wants to delay the country’s consumption tax until October 2019, which left questions on the effect of Japan’s big huge debt purchase program on its fiscal policy. An investment expert in Japan believed that the government might pursue 8 to 10 percent consumption tax rate and it might get postponed once again in 2019.
The decision of Abe may affect the credibility of the Japanese- government bonds in the global market as the capability of the Japanese banks to implement a rate hike can be questioned.The Bank of Japan has more than 300 trillion yen in long term Japanese government bonds and the debt purchase stands at 80 trillion yen.
Further, the Bank of Japan is now having quantitative easing for more than three years already while the European Central Bank has been conducting it for more than a year. But the two central banks are still far from achieving their goal, unlike the Federal Reserve and the European Central Bank.
Bank of Japan could have been focusing mainly on purchasing securities from banks whereas it failed to raise the stock of money or the purchasing power held by households and firms.
On the other hand, Jack Lew, treasury secretary stated that the G& members must communicate properly and refrain from competitive valuations, during the G7 meeting in Sendai Japan,
Separately, shares in Japan have been performing well in the market for the fifth consecutive days as the Federal Reserve will most likely implement a rate hike, which in turn may keep the dollar on hold.Analysts believed that the MSCI’s review regarding the component stocks of its indexes such as the Japanese counters supported the performance of the stocks.
The Nikkei share averaged advanced and the broader Topix advanced 1.0 percent respectively. The JPX-Nikkei Index 400 rose by 1.0 percent as well.
Meanwhile, as the strength of the yen remains, the consumption of Chinese tourists in Japan decline as the shopping and food prices tick up. In 2015, Japan had around 4.99 million Chinese tourists and the per visitor spending rose to 20 percent. Based on calculations, the spending of the Chinese buyers during the said period covered only 1 percent of the retail market of Japan.
On Monday, Japan’s Ministry of Economy disclosed a drop of the total value of retail sales in April. From January-March, the spending of the Chinese tourists in Japan eased 10 percent to the year level. Relatively, the Chinese currency went lower to 16 yen, far from the 18 yen last January.