Japanese Yen Reacts To New Government

The Prime Minister of Japan, Shinzo ABE, has formed a new government with the goal of continuing on the path of fiscal consolidation and the reduction of public debt.

This ABE to restrictive economic policy government is always balanced by the loose monetary policy of the Central Bank of Japan (BoJ), especially since the rise in the spring of the sales tax (VAT) has generated a sharp decline of household consumption.

This decline is probably temporary but it has resulted in a negative growth rate of Gross Domestic Product (GDP) of Japan in the second quarter, quarterly and annual basis. It therefore encourages the Central Bank to maintain the depreciation of the exchange rate of the Japanese Yen to promote corporate profits from exports.

The second estimate of economic growth in Japan in the second quarter will be announced next Monday, September 8. This is an important statistic will follow the monthly report of the Central Bank of Japan on Friday.

On the foreign exchange market, the Japanese Yen has been neutral since the beginning of the year with a lateral phase transition that captures so Chartist on Yen currency as an index, a triangular consolidation.

In recent sessions, the Yen is losing ground on the Forex and seems to switch the role of a neutral factor in a bearish factor.

It is true that monetary fundamentals Japan argue for a decline in the yen, especially since the finding of the negative impact of the VAT rise on economic growth and while it is accepted that the falling Yen supported export companies in recent months.

At all of these economic data is compounded by the appreciation in share price since the end of the first week of August, including new highs US indices, an attraction to risk adverse to the Japanese Yen.