Japan’s Current Account Surplus Widens to ¥1.176 Trillion in May

Japan’s Current Account Surplus Widens to ¥1.176 Trillion in May
July 9, 2020


The Swiss franc rallied against the yen yesterday following the report of an almost stable unemployment rate in Switzerland. Notably, current account surplus and bank lending data published from Japan was also better-than-anticipated. However, the geopolitical issues between China and Japan have tilted the market’s favor towards the Swiss franc. In the past 24 hours, the CHF/JPY pair has risen from 114.06 to a high of 114.60.

The data published by the Bank of Japan indicated that Bank Lending and “shinkin” credit unions increased 6.2% y-o-y in June, compared with a 4.8% increase in the earlier month. Economists had anticipated bank lending to inch upwards a few notches to 5%.  It is the fastest yearly rate of growth since the data began to be published in 2001. The increase was driven by enterprises, which took measures to save cash in order to effectively manage the far-reaching impact of the COVID-19 pandemic. In value terms, total bank lending increased to ¥570.1 trillion ($5.30 trillion).

Deposits at financial institutions also jumped to a record high as large enterprises have set aside the funds they took as loan as a safety measure in order to manage urgent cash requirements. Even households saved a portion of cash handed out by the government to manage economic issues caused by the pandemic.

The jump indicates that enterprises are still experiencing the negative impact of the pandemic, in spite of easing of lockdown measures, enforced to limit the spread of the virus, at the end of May. Total deposits (including certificate of deposits) increased 8% to ¥786.1 trillion due to a jump in deposits from enterprises, public entities, and households.

According to the Ministry of Finance, Japan’s current account surplus widened to ¥1.176 trillion in May, beating the market’s Consensus estimate of ¥1.088 trillion. In the earlier month, the current account surplus was ¥262.70 billion. With this, the country has reported 71 months of successive trade surplus. Notably, the trade deficit narrowed for the third consecutive month to ¥556.80 billion in May, from ¥966.50 billion in April.

While exports declined 28.9% to ¥4.20 trillion, imports fell 27.7% to ¥4.75 trillion. Exports dropped for the third successive month, while imports plunged for the 13th consecutive month, partially due to weak crude oil prices. Car and auto parts exports to the US were weak as the COVID-19 outbreak had softened demand.

The Cabinet Office reported a sharp improvement in the Economy Watchers Sentiment index to 38.80 in June, from 15.50 in the earlier month and considerably higher than economists’ anticipations for a reading of 24.70. Being in the vicinity of consumer and retail trends, hotel workers, taxi drivers and restaurant staff, referred to as ‘Economic Watchers,’ can give a precise idea of changing demand scenario.

During the European session, Switzerland’s SECO (State Secretariat for Economic Affairs) reported a slight increase in the unemployment rate to 3.3% in June, from 3.2% in the earlier month and lower than economists’ anticipation for a 3.6% unemployment rate.

The number of people who are still out of work has increased by 54.6% compared to the same period last year. Specifically, the number of unemployed people in June 2020 was 150,289, an increase of 53,067 from June 2019. However, the June figures reflected a decrease of 5,709 from May.

The economic data from both Switzerland and Japan was better-than-anticipated by economists. Still, the Swiss franc is strengthening against the yen because of geopolitical issues between China and Japan. Notably, both the franc and the yen are regarded as safe-haven currencies.  However, the franc is preferred over the yen because of the geographical location of Switzerland.

The historical price chart indicates that the CHF/JPY pair is rising after forming a double bottom at 112 levels. The next resistance is anticipated only near 117. Additionally, the currency pair is moving along an ascending trend line, as shown in the image below. The RSI indicator also has a positive reading. Therefore we are anticipating the CHF/JPY pair to remain bullish in the days ahead.

CHF - technical analysis - 9th July 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.


Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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