Japanese Government on Defensive over Yen Policy

January 29, 2013

Foreign governments continue to depict the actions and remarks of the new Japanese government as a breach of the rule against competitive devaluation.  The yen recovered 0.4% against the dollar overnight.  The U.S. currency also lost 0.3% against the Australian dollar and sterling and 0.2% versus the Swiss franc and kiwi.  The dollar has risen 0.2% against the euro and 0.1% relative to the loonie, and it is unchanged against the yuan.

Share prices advanced 1.1% in Australia and Taiwan, 0.9% in China, 0.7% in the Philippines, 0.5% in Indonesia and 0.4% in Japan.  But equities fell by 0.6% in India despite an easing of monetary policy there, and stocks are down in Europe by 0.9% in Italy, 0.7% in Spain, 0.4% in France, 0.2% in Germany and 0.1% in Britain.

The 10-year German bund yield fell four basis points.  The 10-year British gilt yield is three basis points lower, but the 10-year Japanese JGB rose two bps.

The price of gold climbed 0.5% to $1662.80 per barrel.  That of West Texas Intermediate crude oil slipped 0.1% to $96.39 per barrel.

The Reserve Bank of India’s repo and reverse repo rates were sliced 25 basis points to 7.75% and 6.75%, a move that had been predicted.  In addition, the cash reserve requirement was also reduced to 4.0% from 4.25% in a move that had not been anticipated.  India’s growth momentum has ebbed, but officials remain sensitive to inflationary risks.

Colombia’s central bank cut its interest rate benchmark to 4.0% from 4.25%.  Such was the third consecutive easing and the 5th cut since July.

Hungary’s central bank, Magyar Nemzeti Bank, is holding an interest rate-setting meeting today.

Japan’s Shoko Chukin index of small business sentiment improved 0.5 points to a reading of 44.3 in January, best since September.

China’s index of leading economic indicators edged up 0.1% in December.

Australia’s index of leading economic indicators in November reversed October’s gain of 0.2%, and the coincident indicator measure only ticked 0.1% higher.

According to National Australia Bank compilations, business confidence in Australia improved by a sharp twelve points, printing at -3 in December (best since July) after a negative 9 score in November. Business conditions rose a point to minus 4, best since September.

In December, New Zealand experienced its first trade surplus (NZD 468 million) since May and its largest surplus in 19 months.  There was a NZD 1.2 billion deficit in 2012.

Turkish consumer confidence improved 2.2 points to a reading of 75.8 in January.  This was the third rise in a row. South Korean business sentiment strengthened in February among both manufacturers and non-manufacturers.

Producer prices in Singapore dropped 0.3% on month in December and by 4.2% from the end of 2011.

German consumer confidence responded to better labor market conditions, printing 0.1 point higher at 5.8 in February.

French consumer confidence stagnated at a weak reading of 86 in January.

German import prices sank 0.5% last month, a bigger decline than projected, and were just 0.3% higher than at end-2011.  Non-oil and energy import prices were unchanged and up 0.3% from their December 2011 levels.  Import price inflation in 2012 averaged 2.1%, down from 8.0% in 2011 and 7.8% in 2010.  Export price inflation was 1.1% in December and averaged 1.7% in full-2012.

Spanish retail sales recorded a larger 10.7% on-year decline in December versus drops of 7.8% in November and 6.8% in full-2012.

Greek PPI inflation slowed half a percentage point to 1.9% last month, thanks to a 0.3% on-month drop in producer prices.

Polish on-year GDP growth was halved to 2.0% last quarter.  Hungary had a 10.7% jobless rate in 4Q12.

Today is the first day of a two-day FOMC meeting that will be followed by a Bernanke press conference tomorrow afternoon.  On the data front, The U.S. Case-Shiller house price index will be released today along with the Conference Board’s U.S. index of leading economic indicators and weekly measures of U.S. chain store sales from Johnson-Redbook and ICSC.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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