The recent Japanese economic data have been mixed, which is not unusual.
Wednesday saw the leading index fall. AFX/FXstreet.com reports:
The index of leading economic indicators fell to 35.0 in January from a revised 37.5 in December, below market expectations, preliminary data from the Cabinet Office showed.
Yesterday, the Conference Board reported a similar story for Japan.
The Conference Board reports today that the leading index for Japan decreased 0.3 percent and the coincident index decreased 0.2 percent in January.
Yesterday also saw data showing that Japanese bank lending growth slowed in February. Reuters reports:
Outstanding loans held by Japan's four main categories of banks rose 1.3 percent in February from a year earlier, increasing for the 13th straight month since February last year, when it turned around from a steady string of falls since 2001.
The pace of growth ebbed from 1.7 percent in the two previous months, largely because growth in lending by city banks slowed to 0.4 percent from 1.2 percent in January, a BOJ official said...
Separate BOJ data showed the most widely watched measure of money supply -- M2 plus certificates of deposit (CDs) -- rose 1.1 percent in February from a year earlier, matching economists' consensus forecast...
Quasi-money grew 2.3 percent in February, the highest year-on-year growth since February 1999 when it hit 2.9 percent, while investment trusts rose 24.4 percent, the highest ever...
A separate government survey of Japanese service sector workers, called "economy watchers" for their proximity to consumer and retail trends, issued later on Thursday produced a diffusion index of 49.2 in February, up from 47.2 in January.
But today, we have news that machinery orders rose the most in five months in January. Bloomberg reports:
Non-government machinery orders, excluding shipping and utilities, rose a seasonally adjusted 3.9 percent to 1.09 trillion yen ($9.4 billion) from December, when they fell 0.7 percent, according to a Cabinet Office report released in Tokyo today. The median estimate of 40 economists surveyed by Bloomberg News was for a 1.4 percent gain.
That, and a weaker yen, was enough for the Japanese stock market today to continue its recovery from last week's falls. Bloomberg reports:
Japanese stocks gained, led by exporters such as Matsushita Electric Industrial Co., after the yen weakened against the dollar and the euro, easing concern its value would hurt exporters' earnings.
"The yen will continue to weaken this year so there's nothing to stop investors buying exporter stocks," said Masaru Hamasaki, senior strategist at Toyota Asset Management Co., which oversees $3.3 billion in Tokyo. "The machinery orders figures confirmed that Japan's capital spending is strong."
The Nikkei 225 Stock Average added 73.73, or 0.4 percent, to 17,164.04 in Tokyo. The broader Topix index gained 9.35, or 0.5 percent, to 1730.31. The Nikkei slipped 0.3 percent this week while the Topix rose 0.5 percent.
Weaker yen, rising stock market. Looks like markets are returning to normal. Or at least that's what some people think. From Bloomberg:
"Risk appetite is back to normal," said Benedikt Germanier, a currency strategist in Zurich at UBS AG, the second-largest foreign-exchange dealer. "Dollar-yen looks firmer. It's a signal the carry trade won't perform badly in weeks ahead."
But beware the repatriation story.
Losses in the yen may be limited by speculation Japanese investors will repatriate funds before this month's fiscal year-end. They sold 669.5 billion yen ($5.7 billion) in bonds and notes during the week ended March 3, the most since September, figures released by the Ministry of Finance showed yesterday.
"The yen might see some continued support, at least until the end of March," said Sharada Selvanathan, currency strategist at BNP Paribas SA in Singapore. "We know there are repatriation flows that are usually yen positive."
Oh well, there is always the Swiss franc.
The Swiss franc slid the most against the dollar this week. The franc is used as a funding currency for carry trades because Switzerland's 2 percent rate is the second-lowest among major economies after Japan. The currency also weakened as a government report showed inflation at a three-year low, limiting scope for the central bank to raise borrowing costs.
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