Talking Points
- The second quarter's tankan survey was an upbeat affair
- But the Yen failed to capitalize on this
- There are probably no implications for Japan's ultra-loose monetary settings
See how the trading community views the Japanese Yen as a new month gets under way at the DailyFX Sentiment Page
The Japanese Yen was steady against the US Dollar Monday, despite a survey of big manufacturers which found them more cheerful than they've been for more than three years and seemed to underscore the Bank of Japan's relative economic optimism.
The official 'tankan' survey for this year's second quarter showed large manufacturers' sentiment at 17, its best since March, 2014. Sentiment at large non-manufacturing firms also rose, for a second straight quarter, and is now at its highest since December, 2015.
The 'outlook' part of the survey found large manufacturers hopeful, rising to a score of 15 from the previous quarter's 11. The tankan's indexes are derived by simply subtracting the number of respondents who say conditions are bad from those who say they are good, with any positive reading meaning that the optimists are winning.
However the Japanese Yen made only modest gains against the US Dollar after this quite punchy survey and soon shed even them. Despite the tankan's vigor the Japanese economic story remains what it was before, one of strong export demand but more worrying domestic levels.
The bottom line is that it remains extremely doubtful that Japan's extraordinarily expansive monetary policy will be reined in anytime soon as consumer price inflation remains at a fraction of the Bank of Japan's 2% target. In so far then as a strong Japan speaks to stronger global growth prospects it's easy to see why the defensive Yen might not gain on better local economic numbers.
Away from data, politics may also be weighing on the Yen market. Japan's ruling Liberal Democratic Party was thrashed at the polls in Sunday's Tokyo assembly election. It was seen as a referendum on Prime Minister Shinzo Abe's administration. Voters gave it an unambiguous 'thumbs down' by flocking instead to the Tokyoites First party of city Governor Yuriko Koike.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
