The yen drifted lower against the loonie yesterday after the Bank of Japan chose to leave the cash rate unchanged while maintaining a dovish stance. The BoJ only resorted to minor tweaks to its ultra-loose monetary policy. A flurry of Japanese economic data releases earlier in the Asian session was also unimpressive. Notably, Canada’s GDP data did not offer any momentum for the Canadian dollar.
The yen weakened against all major currency pairs, including the Canadian dollar. Overall, the CAD/JPY pair rallied from a low of 107.70 to a high of 109.08 in the past 24 hours.
According to Japan’s Statistics Bureau, the country’s unemployment rate inched down to 2.60% in September from 2.70% in August and met economists’ estimates. This is the first decrease in unemployment in three months as the third-largest economy continued to rebound from the aftermath of the Covid-19 pandemic.
The job availability ratio stood unchanged at 1.29 in September, compared to August.
Furthermore, the aggregate number of individuals with jobs grew by 0.10%m-o-m to 67.60 million in September. Correspondingly, the number of jobless people decreased by 4.30% to 1.77 million.
With regards to industry, the number of workers in the hotel and restaurant sectors grew by 6.1% y-o-y in September to 4.16 million. The number of workers in the services and entertainment industry increased by 5% to 2.32 million.
On the contrary, employees in the real estate and leasing industries fell by 7.50% in September to 1.36 million. Workers in the manufacturing industry also recorded a decrease, with the count declining 2% to 10.27 million.
According to the preliminary data published by Japan’s Ministry of Economy, Trade, and Industry (METI), the country’s industrial production rebounded with a growth of 0.20% m-o-m in September following a decline of 0.70% in August but missed forecasts of a 2.40% increase. Correspondingly, the industrial production index rose to 103.30. The shipment index grew by 0.40% to 103.20. Both inventories and inventory ratio index fell by 1.10% to 103.80 and 104.10, respectively.
In a separate news release, the METI stated that Japan’s retail sales jumped 5.80% y-o-y in September following a 7.10% increase in the previous month but missed forecasts of 6% growth.
The reported figure reflects the 19th successive monthly growth in retail sales as consumption continued to rebound from the COVID-19-driven downturn. The increase was led by a 7.50% surge in the sales of fuel food and beverages. Similarly, the sales of automobiles grew by 7%.
On a m-o-m basis, retail sales fell by 0.10% in September, backtracking a 0.20% rise in August.
Later in the Asian session, following the monetary policy meeting, the Bank of Japan announced its decision to hold interest rates unchanged at -0.10%, in line with economists’ estimates.
More importantly, the central bank chose to permit long-term interest rates to increase over 1%, the prevailing upper limit, while continuing with the massive stimulus program. Specifically, hereafter, the BoJ will consider the upper limit of 1% for 10-year government bond yields as the benchmark in its market operations.
Notably, this is the first time since July that the central bank has partly amended its monetary policy. Following the announcement, the 10-year JGB (Japanese Government Bond) yield surged to 0.955%, the highest level since May 2013.
According to the Cabinet Office, the country’s consumer confidence index inched up to 35.70 in October from a six-month low of 35.20 in September and surpassed forecasts of 35.10. Major components of the index, namely income growth, overall livelihood, and inclination to purchase durable goods, recorded an increase.
According to the data published by the Ministry of Land, Infrastructure, Transport, and Tourism (MILT), the country’s housing starts fell by 6.80% y-o-y in September, following a 9.40% decline in the previous month. The reported figure was worse than forecasts of a 6.10% decrease.
According to Statistics Canada, the country’s economy did not record any change in August after remaining unchanged in July. Economists had anticipated Canada’s GDP to grow by 0.10% in August. Multiple factors, including higher interest rates, drought scenarios, and forest fires, harmed the economy.
The services-producing sector inched up 0.10%m-o-m in August. On the contrary, the goods-producing sector contracted 0.20% in the same period. As a whole, eight out of 20 industrial sectors posted growth. The wholesale trade posted a growth of 2.30% in August. This is the third increase in four months, as six out of nine subsectors posted an expansion.
The mining, quarrying, and oil and gas extraction sectors expanded by 1.20% in August, reflecting the third successive month of growth. Notably, with this growth, this sector’s activity has rebounded above the April 2023 level.
However, the manufacturing sector recorded a decline of 0.60% in August, reflecting the third successive monthly contraction, as both durable and non-durable goods manufacturing sectors posted a decline. Likewise, accommodation and food services reported a decline of 1.80% in August.
Interestingly, after two successive monthly declines, the transportation and warehousing sector rose by 0.80% in August. Similarly, the finance and insurance sector recorded growth for the third consecutive month, inching up 0.40% in August.
Retail trade posted a decrease of 0.70% in the same period. Also, agriculture, forestry, fishing, and hunting contracted by 3.2% in August, reflecting the sector’s steepest decline since August 2021.
According to the advance data published by Statistics Canada, the country’s real GDP stood unchanged in September.
The weak economic data from both countries is expected to keep the CAD/JPY pair range-bound in the short term.
The historical price chart indicates that the CAD/JPY pair is ascending after testing the support at 107.95. The next resistance is anticipated to be only near 109.95. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the CAD/JPY pair to remain in an uptrend for the next few trading sessions.
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.
