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Trade Deficit Wider Than Expected

JPY

USD/JPY has rebounded from the late NY lows of 133.50 to be back at 134.15. We are still comfortably below recent highs of just above 135.50 though.

  • JPY gyrations continue to track UST yields closely. Current USD/JPY levels look a little high relative to the US 10yr, but yen is likely being pressured to some degree via improved risk appetite from stronger equities. US futures have climbed further in early trade today.
  • The other focus point will be tomorrow's BoJ decision. No broad changes are expected from an accommodation standpoint, but the focus will be on the outlook and YCC.
  • Japan 10yr futures have recovered some ground, aided by US and EU moves. We ended just above 147.00, after an earlier dip towards 145.00.
  • Whilst this may take some of the pressure of cash JGBs ahead of the 0.25% yield level, volatility could still remain high ahead of tomorrow's BoJ meeting.
  • Note 1 week USD/JPY implied vol continues to climb, up above 17% today.
  • Just released trade data came close to expectations, exports up 15.8% versus 16.1% expected. Imports were firmer at 48.9%, versus 44.0% forecast. This drove a slightly wider trade deficit, -2384.7bn yen versus -2040.4bn yen expected. We are now at fresh wides on the trade deficit going back to 2014.
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