Schedule and Expectations

Starting at 00:30 CET on Friday (or Thursday at 18:30 EST) we have the release of two bits of employment data. The more important one is the jobless rate (or unemployment rate). This is expected to drop two decimals to 2.2% from 2.4% registered last month.

The jobless rate in Japan has been trickling down from at least early 2017. Therefore, the drop would be in line with the trend, bringing it back to the level registered in June of last year. The jobs-to-applicants ratio comes out at the same time and is expected to remain at the same level for the third time in a row at 1.63.

Also at the same time, we have the CPI for Tokio. This rarely influences the market, especially with other, more important data coming out at the same time

Twenty minutes later, we have the release of quarterly capital spending data. This is for the fourth quarter, so the information is a bit stale. It’s a measure of how much businesses are spending on new projects. Therefore it’s also a predictor of industrial production in the medium-term. Expectations are for the measure to jump 17.5%, well above the just 4.7% increase in the prior quarter. It would be the highest increase in CapEx registered since before the last recession.

Then at 01:30 CET, still on Friday (or 19:30 EST on Thursday), we get the Nikkei Manufacturing PMI. This is the preeminent indicator of industrial confidence in the economy.

This data took a dive in January but remained in growth territory. We had the preliminary release for February on the 21st, and that missed expectations. It continued the downward trend to 49.5, marking the first time in contraction territory since mid-2016. Expectations are for a revision of the number downward to 48.5.

The data calendar for Japan closes out at 06:00 CET (or 00:00 EST) with the consumer confidence index, which largely doesn’t affect the currency pair.

The Markets

Geopolitical tensions have provided a flight to safety over the last few days. Given the heavy calendar of events still on the table going into the weekend, it wouldn’t be surprising if the market stayed in a risk-off pattern. This would help buoy the yen against it’s more risky rivals and might help offset potential negative domestic data releases during the Asian session.

After the report that the Japanese economy had essentially stagnated for the last year, investors and traders are looking for anything that could be a sign of a trend reversal. This is especially true if we consider that the BOJ is in a very awkward position when it comes to supporting a potential downturn.

Even though one can blame a good portion of Japan’s economic woes on external factors, the trade war affecting their two largest trade partners being chief among them, internal factors play a role as well. This is why the capital spending data might be extra important this time around.

Low Japanese unemployment and high participation is the norm. But even though everyone is working, Japan has a well-known problem of a shrinking labor force. Even if the GDP on a national level stagnates, it is still growing at on a per-capita basis. And this shows the signs of an otherwise healthy economy!

Wages have been growing consistently (1.8% in the last measurement, well above inflation). In fact, so has consumer spending (0.6% at the last reading).

Summary

In summary, the data releases might give us some insight into the medium-term performance of JPY pairs. However, in the short term, at least until the close of trading, the currency is likely to be more driven by ratcheting up or easing geopolitical concerns.