Japan To Extend & Expand Covid-19 Emergency

The yen outperformed all of its G10 peers Monday except another key safe haven CHF. USD/JPY retreated to its lowest point since Aug 4, as softer than expected China's activity data, geopolitical risk posed by the Afghan situation and goings-on surrounding the spread of the Delta variant.

• Local media outlets cited government sources as noting that the decision to declare a Covid-19 state of emergency in seven more prefectures will be made today. Prefectures to be covered by the new emergency declaration include Ibaraki, Tochigi, Gunma, Shizuoka, Kyoto, Hyogo and Fukuoka. Existing emergency and quasi-emergency rules are reportedly set to be extended through Sep 12.
• Kyodo circulated a new political poll Monday, which showed that approval for PM Suga's Cabinet fell 4.1pp to 31.8%, with 65.1% of respondents noting that they don't want Suga to remain PM.
• Focus turns to Japan's trade balance & core machine orders (Wednesday) as well as national CPI (Friday).
• USD/JPY last seen at Y109.25, virtually unchanged. Downside focus falls on Aug 4 low of Y108.72 and a move through that level would open up May 25 low of Y108.56. Conversely, a rally above Aug 11/Jul 7 highs of Y110.80/82 would shift focus to Jul 2 high of Y111.66.