Japanese Finance Ministry Amps Up Threat of Yen Intervention Support

March 25, 2024

With the yen down 12.5% against the dollar so far this quarter and hovering not far from a its three-decade low, Japanese Vice Minister for International Affairs Masato Kanda made a not-subtle threat of direct intervention purchases of the currency.

The weakening of the yen is not in line with fundamentals and is clearly driven by speculation. We will take appropriate actions against excessive fluctuations, without ruling out any options.

Nonetheless, Japan’s currency is currently only 0.1% firmer than its pre-weekend closing. The dollar has also lost 0.3% against the Australian currency and sterling, 0.2% relative to the euro, kiwi, and yuan, and 0.1% against the Canadian dollar. China’s government has also been selling foreign currency to support the yuan.

After last week’s strong performance of equities, share price gains have been trimmed this Monday. In pre-open futures trading, the U.S. Dow, Nasdaq and SPX show declines of 0.4-0.7%. Stocks closed down 1.2% in Japan and 0.7% in China, while India’s market was shut for the Holi Festival. The British FTSE and Paris Cac are 0.5% and 0.4% softer so far.

Sovereign debt yields are higher, in contrast, with increases of four basis points in the 10-year U.S. Treasury and German bund yields and even bigger increases in France, Italy and the U.K..

Prices for WTI oil and Comex gold are up 0.8% and 0.6%, while Bitcoin has edged down 0.2%.

Among price data reported today,

  • A monthly 1.0% jump in consumer prices in Singapore last month more than reversed January’s 0.7% slide and lifted the on-year inflation rate by a half-percentage point to 3.4%. Core CPI inflation printed at 3.6%. Those February levels are hovering at the top of the range projected by monetary authorities but down from the 7.5% peak in September 2022.
  • Malaysian CPI inflation rose 0.3 percentage points to a 4-month high in February but remained will below the 16-month high of 4.7% in August 2022.
  • Finnish producer price inflation of -5.1% in February was sub-zero for an 11th straight month but the least negative since April 2023.
  • Spanish producer prices in February dropped 2.3% on month and 8.2% on year, marking the biggest 12-month decline in five months.
  • Sri Lanka experienced producer price deflation for an eight straight time in January. The drop of 3.0% was a far cry from the record high PPI inflation quote of +103.4% in August 2022 but less than half as much as the record low of -7.6% last October.

The British distributive trades survey index improved sharply from a reading in January of -50 to -7 in February and +2 this months, marking its best reading in almost a year.

Dutch GDP growth last quarter got revised upward 0.1 percentage point to +0.4% versus the third quarter and -0.4% compared to the final quarter of 2022. growth in calendar 2023 of just 0.1% was down from 4.3% in 2022 and 6.2% in 2021. The Dutch current account widened from EUR 89.9 billion in 2022 to EUR 104.4 billion in 2023.

Consumer confidence in Spain during February edged 0.1 index point under January’s 5-month high but, at 78.6, was well softer than last August’s reading of 94.4.

Consumer confidence in South Africa rose two index points this quarter to a one-year high.

Czech consumer sentiment and business confidence each improved this month to 29- and 7-month highs, respectively.

Japan’s index of leading economic indicators was left unrevised at a 2-month low. the index of coincident economic indicators, however, was revised downward to a 20-month low and given a trend designation of “weakening.”

The Chicago Fed National Activity Index rebounded sharply, reversing all of its decline in January and posting the second best score in the past seven months. U.S. new home sales will be reported later today, but investors will have to wait until Friday to learn this week’s most eagerly awaited data releases, which will be for personal income, personal consumption expenditures, and the PCE price deflator.

Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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