Influencing Factors on USD/JPY
MINISTRY OF FINANCE – The MoF is the single most important political and monetary institution in Japan. Its influence in guiding the currency is more significant than the ministries of finance of the US, UK or Germany. MoF officials often make statements regarding the economy that have notable impacts on the yen. These statements include verbal intervention aimed at avoiding undesirable appreciation/depreciation of the yen.
BANK OF JAPAN (BOJ) – In 1998, Japan passed new laws giving the central Bank (BoJ) operational independence from the government (MoF). While complete control over monetary policy has shifted to the BoJ, the MoF remains in charge of foreign exchange policy. Toshihiko Fukui: BoJ Governor.
INTEREST RATES – The Overnight Call Rate is the key short-term Interbank rate. The call rate is controlled by the BoJ’s open market operations designed to manage liquidity. The BoJ uses the call rate to signal monetary policy changes, which impact the currency.
MINISTRY OF ECONOMY, TRADE AND INDUSTRY (METI) – The Government institution aimed at supporting the interests of Japanese industry and defending international trade competitiveness of Japanese corporations. METI’s power and visibility is not as significant as it used to be in the 1980s and early 1990s, when US-Japan trade issues were the “hottest” topics in the Forex market.
- ECONOMIC DATA – The most important economic data items from Japan are: GDP; Tankan survey (quarterly business sentiment and expectations survey); international trade; unemployment; industrial production and money supply.
NIKKEI – Japan’s leading stock index. A reasonable decline in the yen usually lifts stocks of export-oriented companies, which tends to boost the overall stock index. The Nikkei-yen relationship is sometimes reversed, wherein a strong open market in the Nikkei tends to boost the yen (weighs on USD/JPY) as investors’ funds flow into yen-denominated stocks.
CROSS RATE EFFECT – The USD/JPY exchange rate is sometimes impacted by movements in cross exchange rates such as EUR/JPY and GBP/JPY. A rising USD/JPY (rising dollar and a falling yen) could be a result of an appreciating GBP/JPY, rather than direct strength in the dollar. This rise in the cross rate could be highlighted due to contrasting sentiment between Japan and Great Britain.
DISCLAIMER: Trading futures, options on futures and off-exchange Foreign Exchange market (FX, Forex) is very speculative in nature, involves considerable risk and is not suitable for all investors. Before participating in trading, you should carefully consider your investment objectives, level of experience and risk appetite. Investors should only use risk capital when trading because there is always the risk of substantial loss. Most importantly, do not invest money you cannot afford to lose. Any mention of past performance is not indicative of future results. Account access, trade executions and system response may be adversely affected by market conditions, quote delays, system performance and other factors.
Past results as represented in testimonials are not necessarily indicative of future results or success. Testimonials may not be representative of all reasonably comparable students. Trading involves significant risk of loss and may not be suitable for all investors.
RISK WARNING: Trading futures and foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your monetary objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your deposited funds and therefore you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent advisor if you have any doubts. Past returns are not indicative of future results.
Compass FX and its affiliates assume no responsibility for errors, inaccuracies or omissions in these materials. They do not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Compass FX and its affiliates shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. This is not a solicitation to buy or sell currency or futures. Compass FX is compensated for its services through commissions and/or the spread between the bid/ask prices. All replies should be sent to firstname.lastname@example.org . Replies sent to email@example.com will be received by the Compass FX corporate email system and are subject to storage and review by someone other than the recipient.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.