On the view of the economic calendar, the price index for the products of domestic companies was released on Wednesday. This report is similar to the PPI Index (Producer Price Index) and is one of the best indicators to predict the next consumer inflation. The index was in line with the 3 percent prediction by analysts, with a monthly growth of 0.2 percent, indicating an improvement in inflationary pressures in Japan. However, the Japan’s inflation rate is weak, and it is not expected that in the near future Japan’s inflation rate will exceed 2 percent. But if it would not coming true the 2 percent inflation will lead to the current expansion of the Bank of Japan’s monetary policy not to be changed, so that the Japanese yen will be under pressure by the divergence of Japan’s monetary policy with Europe, Britain and the United States.
All the above factors can exacerbate the weakening of the Japanese yen. But there are risks that can affect the market, the risks that their resources are not economical. North Korea’s crisis and Japan’s general election will have a serious impact on the market in the coming days
Recently The North Korean crisis has become the headline of the news. Although it is not expected a country enters into a complete war with a high probability of defeat, it should not be conceived that the North Korean leader will easily retreat. The North Korea had announced before that it was seeking an atomic bomb test with Pacific Continental Rockets, which was indirectly referred to Japan. Such a test will be very risky, and if an unexpected event occurring during the test, it will not be a way to return. In this case, intensifying of market risk aversion will encourage traders to support the Japanese yen.
Japan’s general election will also be held October 22. The purpose of this election is to strengthen the prime minister of Japan. Recently, Tokyo governor has set up a party called “Hope Party”. The prime minister fears that this party will weaken the power of the prime minister’s party (Liberal Democrats). In fact, it is believed that the Tokyo governor, with the establishment of the Omid Party, it seems that the Tokyo’s governor looking for preparing the conditions for introducing a rival for the current Prime Minister of Japan (Abe) in the upcoming elections.
This affects the market situation, as the head of the Central Bank of Japan and the prime minister of this country support the Bank’s expansionary policies. In the past five years, the prime minister has taken a strong expansionary approach and executed by the head of the Central Bank of Japan.
But after five years, Japan’s prospect of inflation is still worrying. At the beginning of working the Hope Party, investors were worried that the new rival for the prime minister might not support expansionary policies and economic stimulus, but the party leader announced that there is no need to change the current policy. Accordingly, it is expected that the Japanese yen is currently neutral.