ASIA – Japanese inflation expected, yen and yuan falling

ASIA – Japanese inflation expected, yen and yuan falling
ASIA – Japanese inflation expected, yen and yuan falling

A preview of the day ahead in Asian markets.

Japanese inflation is being scrutinized this Friday, with probably greater attention than usual given the fall of the yen towards record levels, rising oil prices and the cautious approach of the Bank of Japan in matter of normalization of monetary policy. Sentiment across the continent on Friday could be clouded by falling U.S. stocks and bonds and Thursday’s rise in the dollar, tempting investors to lock in gains – Asian stocks hit a two-year high this week, and Global stocks have reached all-time highs.

As is increasingly the case recently, China is an exception. Big company stocks fell to a two-month low on Thursday and are on track to suffer their fifth consecutive weekly loss. Trade tensions between China and the West continue to worry investors. German Economy Minister Robert Habeck set the stage on Thursday by declaring in Seoul that both South Korea and Germany aimed to diversify from China, expand their suppliers of raw materials and reduce their dependence on essential products.

Oil prices continue to rise, with WTI and Brent oil futures both hitting their highest levels since April 30. WTI rose 13.5% from its June 4 low and has risen in all but two of the 11 trading days since then, while Brent is up 12% and has moved higher over the past three sessions. It is still early, but central banks are aware of the inflationary impact that a prolonged rise in oil prices could have, particularly the Bank of Japan.

With the yen near all-time lows against the dollar, rising dollar-denominated oil prices are crucial for a country that imports more than 90% of its energy.

The yen fell back to 159.00 per dollar on Thursday, in “intervention” territory. Could traders push it closer to the 160.00 level and test Tokyo’s resolve? The US Treasury said on Thursday that no major trading partners appeared to have manipulated its currencies last year, but it added Japan to a foreign exchange “watch list”, alongside other Asian countries such as China, Vietnam, Taiwan, Malaysia and Singapore.

Japan’s latest inflation figures are expected to show that annual core inflation, excluding food and energy, likely rebounded in May to 2.6%, from 2.2% in April. Headline inflation, which was 2.5% in April, has probably risen too – Goldman Sachs economists forecast 2.9%.

Friday’s Asia/Pacific regional calendar also sees the release of the first PMI reports for June, preliminary readings of factory and services activity this month in Japan, Australia and China. India.

In the corporate world, Softbank Group holds its annual general meeting of shareholders.

Here are the main events that could move the markets on Friday:

– Inflation in Japan (May)

– PMI Japan, Australia, India (June)

– General meeting of Softbank



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