Coming Up: January Japan Current Account

With most of Asia closed for the Lunar New Year, a corresponding drop in liquidity is to be expected. This could heighten the possibility of more volatility during the Asian session in response to news releases.

We’ll go in chronological order of things to keep in mind ahead of the important data releases.

Overall Household Spending

We start at 00:30 CET (18:30 EST) with Overall Household Spending, which is used as a gauge of consumer optimism.

If consumers think that difficult times are ahead, they will prefer to try to save. Consumers are also the largest component of the economy, so increasing consumer spending is considered a proxy for the economy.

Higher consumer spending is generally seen to support the JPY, while lower spending will have the opposite effect. However, this number is usually priced into the market, so a move isn’t really expected unless there is a major beat or miss of expectations.

Speaking of which, the consensus among analysts is for consumer spending to come in at -0.1% y/y, which would be an improvement over the -0.6% registered in the prior month.

This data is also important for fiscal policy, especially in regards to the now twice delayed sales tax hike. An additional 2% increase to 10% sales tax has been approved, but the government has held back on implementation over fears it would affect consumer sentiment and the economy.

Currently, it’s scheduled to go into effect in October, but a continuing string of poor household spending performance could provide further justification to delay the hike once more.

Current Account

Twenty minutes later we have the major event of the session for currency markets, which is the release of Japanese current account data.

Arguably current account is one of the data releases that has the most direct relation to forex, since it’s a measure of the difference in value between exports and imports of goods, services and interest (the trade balance measures the same but only for goods).

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