FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank
of Tokyo Mitsubishi UFJ notes that the yen has weakened further
during the overnight session.
Hardman sees various reasons for this behaviour, i) an ongoing
improvement in investor risk sentiment driven by heightened
expectations that a political agreement to avert the US fiscal
cliff is near, ii) building expectations that the BoJ will ease
monetary policy at tomorrow's meeting which may also include an
upward adjustment to the inflation goal, and iii) the release of
another weak Japanese trade report for November.
He notes that the report revealed that Japan posted another
sizeable trade deficit (
) totalling JPY868 billion in November bringing the cumulative
trade deficit over the last twelve months to JPY6.52 trillion
equating to around 1.4% of GDP. In comparison, Japan posted a trade
surplus totalling JPY6.62 trillion in the twelve months to November
2010 highlighting the scale of the deterioration that has occurred
in Japan's external position which weakened fundamental demand for
Hardman comments that export growth has proved stronger than
expected in November with the annual pace of contraction for
nominal export growth rising to -4.1% from -6.5% in October. On a
real basis, exports contracted for the seventh consecutive month
but exports of electrical machinery increased for the first time in
five months. Export volumes to by region revealed a monthly decline
in exports to the US and an eighth consecutive monthly decline to
Elsewhere, Hardman feels that there were some encouraging signs
that the negative impact on exports to China from the boycotts of
Japanese products was easing with exports of transport equipment to
China posting a modest 3.4% monthly rebound following a sharp
-38.4% decline in October.
Overall, he notes that the report highlighted that exports are
unlikely to recover before year end although the ongoing economic
recovery in Asian economies points towards an export recovery in
2013. The World Bank raised its economic growth forecasts for China
and East Asia overnight projecting that China will expand by 8.4%
in 2013 compared to an earlier 8.1% forecast made in October.
He finishes by commenting, "At the margin today's report strengthen
the case for further BoJ monetary policy easing at tomorrow's
meeting with the Japanese economy likely to have contracted for the
third consecutive quarter in Q4."