Big Troubles in Little Japan

Market Trends - 23/08/2016

The Purchase Manager’s Index in Japan’s manufacturing sector is slowly and gradually moving towards expansion levels as Markit data showed earlier this morning. Preliminary data regarding conditions that account for the overall manufacturing sector appear to have stepped up to 49.6 in August, leaving behind expectations of 49.5 and from the previous month’s values of 49.3. Although figures continue to fluctuate, the recent measurement is the smallest since March. The Japanese Yen continues to overshadow production whereas recent disruptions in supply based on natural disasters are subtly being lost in the background. Japanese policymakers have dwelled on meeting a mandate of inflation at 2.00% while fresh fiscal policy of approximately ¥28.10 trillion had been approved by the Japanese cabinet in an effort to lift growth.

The central bank of Japan has the potential to further ease as cited by Bank of Japan’s Governor Haruhiko Kuroda in a recent speech. In order to abate risks that are surrounding the third biggest economy of the world, Governor Kuroda once again reiterated on his statements that interest rates can go to even lower levels, quantitative easing can and will be raised if deemed necessary whereas the recent increase in the exchange traded funds program has supported and pushed the Nikkei 225, erasing the expectations that may have been caused from the strength of the local currency.

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