Japan seems to be the epicenter of the week as it draws all the spotlight following speeches from its government and bank officials. During China’s hosting of the G20, Japanese officials made the consequences the Brexit vote clear, regarding both economies. If the United Kingdom does eventually decide to leave Europe, then Japanese companies located in London will also be forced to. Large Japanese corporations such as the pharmaceutical and car industries, as well as financial institutions, may opt to transfer their offices to continental Europe. This could damage the unemployment rate for the UK but and hurt profits for Japanese businesses.
As the third biggest economy of the world is facing a stagnant growth rate while battling deflation, the Bank of Japan Governor Haruhiko Kuroda also made the bank’s stance quite clear. The Governor’s speech on "quantitative and qualitative monetary easing with a negative interest rate” stated that the central bank still has ample room to provide more stimulus in all three sections, quantity, quality and interest rates. Despite the Governor’s statement and the “no limit in monetary policy”, market reactions continue to add strength to the Yen holding back the economy. Weak economic data also arising from the US on Friday is just adding further to the strength of the Yen, with the USDJPY reversing from its soft uptrend and touching 103.13 on Kuroda’s pronouncement.
Japan’s Troubles Inside and Out
Market Trends - 05/09/2016