Japan Tried To Release Some Data – And Then Along Came Trump With A “Major, Major” War

Friday is a data-ish kind of day.

And while it’s pretty hard to make that interesting (no one ever got excited over an econ deluge), it’s worth noting that what we got out of Japan and Europe overnight comes on the heels of the BoJ meeting (profiled here) and the ECB meeting (see here) at which both central banks stuck generally to the script.

Here are the highlights from Japan:

  • Consumer prices excluding fresh food, the core measure for inflation, increased 0.2 percent in March from a year earlier (forecast 0.2 percent).

CPI

CPI1

  • The unemployment rate for March was 2.8 percent (forecast 2.9 percent).
  • Industrial production fell 2.1 percent in March from the previous month (forecast -0.8 percent). [From Goldman: “A decline in industrial production in March was widely forecast due to a sharp upturn in output of +3.2% in February on the Chinese New Year and other factors, but the pullback was far more than expected. Declines were most evident in general-purpose, production and business-oriented machinery, followed by electronic components and devices. Shipments also fell 1.1% mom, resulting in a 1.6% mom increase in inventories. The government maintained its overall assessment that production “continues to show an upward movement.”]

JapanIPMarch

Real Household Spending

  • Mar: -1.3% yoy vs. market: -0.5%, GS: -0.5%, Feb: -3.8%
  • Mar: -2.0% mom, Feb: +2.5% mom

Real Core Household Spending (excluding imputed rent, vehicle purchases, gifts and remittances)

  • Mar: -1.9% yoy, Feb: -3.7% yoy
  • Mar: -2.9% mom, Feb: +0.2% mom
  • [Goldman: Based on the Household Survey, real consumer spending in March declined 1.3% yoy, the 13th straight month it has fallen on a yoy basis. Meanwhile, core consumption, which excludes items that are not part of spending, such as money gifts, printed at -1.9% yoy, an improvement from February (-3.7%) as special factors had a lesser impact. On a mom basis, however, real consumer spending (seasonally adjusted) was down a sharp 2.9%, again approaching the previous low recorded in March 2011, primarily due to a sharp mom decline in educational spending. Real disposable income of workers’ households in March printed at -2.0% yoy (February: +1.7%), marking a decline for the first time in five months.]

March Retail Sales

  • +2.1% yoy vs. market: +1.5%, Feb: +0.2%.
  • -0.2% mom, Feb: +0.3% mom.

March Employment

  • March unemployment rate: 2.8% vs. market forecast: 2.9%, GS: 2.9%, February: 2.8%
  • March job openings-to-applicants ratio: 1.45x vs. market: 1.43x, GS: 1.43x, February: 1.43x

GSJapanSpending

“The employment situation is definitely strong, while wage and income growth are still quite depressed,” Takashi Miwa, chief economist at Nomura Securities Co. in Tokyo, said on Bloomberg TV. “This is why consumption demand is still quite weak.”

“The most important point is that wage gains are weak,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “The problem will loom over the prospects of raising a sales tax down the road.”

Of course none of that really mattered for the yen early on. Why? Simple. This:

  • TRUMP SAYS CHANCE OF `MAJOR, MAJOR’ CONFLICT WITH N.KOREA: RTRS

Here’s the excerpt:

U.S. President Donald Trump said on Thursday a major conflict with North Korea is possible in the standoff over its nuclear and missile programs, but he would prefer a diplomatic outcome to the dispute.

“There is a chance that we could end up having a major, major conflict with North Korea. Absolutely,” Trump told Reuters in an Oval Office interview ahead of his 100th day in office on Saturday.

Nonetheless, Trump said he wanted to peacefully resolve a crisis that has bedeviled multiple U.S. presidents, a path that he and his administration are emphasizing by preparing a variety of new economic sanctions while not taking the military option off the table.

“We’d love to solve things diplomatically but it’s very difficult,” he said.

And so, geopolitics trumps (pun fully intended) econ once again. At least until more econ (from Europe) was released six or so hours later…

USDJPYTrump

Via Bloomberg

  • The dollar pares this year’s biggest weekly advance against the yen as U.S. President Donald Trump warned of a possible “major conflict” with North Korea.
  • Trump told Reuters “a major, major conflict” with North Korea was possible if diplomatic solutions fail
  • Given the advance this week, “the dollar will lack strong incentives to chase higher,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. “Technically, dollar-yen will stay in a 110-to-112 range for the next week”
  • Traders will keep an eye on data releases out of the U.S. (including the GDP print and University of Michigan consumer sentiment index) and on North Korean headlines
  • Trump said a “major conflict” with North Korea was possible if diplomatic solutions fail, bringing geopolitical tensions back into spotlight
  • Risk appetite took a hit and USD/JPY dropped toward 111.00 support to pare this year’s biggest weekly advance; it reversed losses as the London session got under way to trade 0.1% higher at 111.30

Here’s a quick look across Asian equities:

  • Nikkei down 0.3% to 19,196.74
  • Topix down 0.3% to 1,531.80
  • Hang Seng Index down 0.3% to 24,615.13
  • Shanghai Composite up 0.08% to 3,154.66
  • Sensex down 0.2% to 29,956.44
  • Australia S&P/ASX 200 up 0.04% to 5,924.06
  • Kospi down 0.2% to 2,205.44
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