Japan faces a trade deficit due to reduced demand in China.

The Japanese yen has continuously weakened, with the yen depreciating near its highest point since the beginning of November 2022. This is due to increasing disparities in monetary policies between the United States and Japan. Investors anticipate that the Federal Reserve (FED) in the United States may raise interest rates again this year, whereas the Bank of Japan (BoJ) is expected to maintain its short-term interest rate at -0.1%. However, some investors speculate that the BoJ may raise interest rates in an upcoming meeting.

Former finance ministry officials stated that "easing of monetary policy can potentially lead to further depreciation of the yen, but currency intervention may not occur because the yen's depreciation is not rapid compared to previous instances of intervention in September or October. However, there is still a possibility of further yen depreciation."

Japan's trade balance has decreased once again, with a deficit of 930.5 billion yen in August, compared to 2,790.4 billion yen in the same month of the previous year. This decline is primarily due to a consecutive 2-month decrease in exports, amid weakened foreign demand, particularly from China.

Imports into Japan contracted by 17.8% YoY, amounting to 8,924.82 billion yen in August, following a 13.6% decline in July. The steepest decrease in imports was in energy, which fell by 36.6%. On the export front, Japan's exports decreased by 0.8% YoY, totaling 7,994.35 billion yen. This marks the second consecutive month of export decline. While exports to the United States increased slightly, exports to China saw a significant decrease due to economic issues in the country.

The depreciation of the Japanese yen has greatly benefited Japan's exports, as it supports the competitiveness of its exports by making them more affordable. However, the prolonged use of monetary easing policies has been criticized by investors for distorting market dynamics and affecting the profitability of banks and other businesses.

The yield on Japan's 10-year government bonds has risen above 0.7%, reaching its highest level in nearly a decade, following comments from Haruhiko Kuroda, the Governor of the Bank of Japan, stating that the central bank could end negative interest rates when inflation is stably around 2%. The BOJ may have sufficient data by the end of this year and is expected to consider raising interest rates within the year, resulting in an increase in yields on Japanese government bonds during this period.

Techical analysis data (5H)

Resistance: 148.47, 148.59, 148.73

Support: 148.20, 148.07, 147.94

Source: Investing.com