Week in FX Asia – BoJ Facing Strong Yen and Sales Tax Hurdles

The USD/JPY will finish the week very close to 99 yen per dollar. This week the spotlight was on the Fed and economic indicators. The main indicators this week were the US GDP and the NFP employment figures. US GDP surprised the market beating expectations by printing a 1.7 percent annual growth in the second quarter of 2013. Employment was not that positive and failed to beat expectations of around 185,000 new jobs. The US Economy did add 162,000 which along downwards revisions paint a more modest recovery than originally thought.

The Fed and Bank of Japan face similar risks. The Fed has the slight edge that the US economy is showing more pronounced signs of recovery, but it has hesitated to act with conviction on announcing an end of QE out of fear of compromising that fragile growth. Adding to the Federal Reserve’s issues is the fact that chairman Ben Bernanke will probably not be part of the Fed come next year. The Bank of Japan on the other hand have a solid structure in place as Governor Kuroda has been at the head of the central bank for only 6 months and achieved unanimous increase in stimulus. There have been some differences of opinion between members, but nothing as contradictory as Fed’s member statements.

Analysts and observers have made the case that the Bank of Japan needs to move off the Fed model of non-intervention if the economic recovery is happening, but at a slower pace. The wait and see approach has done no favors for the JPY. This week Kuroda has a chance to increase his reputation as a bold policy maker with his Thursday’s statement following the rate announcement.


* AUD Reserve Bank of Australia Rate Decision
* GBP NIESR Gross Domestic Product Estimate
* NZD Unemployment Rate
* GBP Bank of England Inflation Report
* JPY Bank of Japan Monetary Policy Statement
* AUD Unemployment Rate
* EUR ECB Publishes Monthly Report
* CNY Consumer Price Index
* CAD Unemployment Rate

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza