Three Potentially Big Influences on the Yen

North American trade was mostly unenthusiastic today as the calendar failed to provide any notable releases, but that was the case heading in to the day as well as neither Asia nor Europe provided anything compelling.  The biggest news of the day came by way of IBM whose stock dropped 8.4% on news that they were abandoning an earnings forecast for 2015.  The DJIA took a dive right along with the company, but was gaining back those losses as the day proceeded mainly on the back of positive expectations for Apple whose earnings will be reported after the market closes today.

Currency markets also opted for the slow roll today as the majors barely moved more than 60 pips from the opening of trade for the week.  The USD/JPY has the potential to be one of the more interesting pairs though as a variety of factors could be influencing it as the week progresses.  Here are some of the current and future headlines that could influence the pair:

China

Chinese GDP will be released this evening along with Retail Sales, Industrial Production, and Fixed Asset Investment along with a press conference by the NBS whom releases the state derived data.  Expectations are for the Chinese economy to have grown 7.2%, but rumblings of a slowdown in the nation are growing louder, and considering all the activity of late from the PBoC, there may be a fire causing all that smoke.  If Chinese GDP were to miss depresses expectations, the JPY could become a popular safe haven play as it gains strength across the board.

Japanese Government Pension Investment Fund (GPIF)

The $1.2 trillion fund announced to start off the week that they will be increasing their investment in domestic equities, which could be quite a boon to the Japanese stock markets.  The typically correlated USD/JPY could catch a bid right along with them if the good news sparks the rally many in the Japanese government hope it will.

Potential Sales Tax Hike Delay

Japanese Prime Minister Shinzo Abe mentioned in an interview this weekend that the next planned sales tax hike is not a sure thing, and even characterized it as “meaningless” if it inflicted too much damage on the country’s economy.  The admission could be a backhanded acknowledgement that the current environment of slow growth is a direct result of the previous tax increase and could get the Bank of Japan talking about boosting stimulus once again.  That would be a turnaround from current BoJ doctrine which continues to say that the economy is reacting as they expected.  If the BoJ does side with Abe and hints at further additions to their balance sheet another run higher in the JPY crosses may be in the cards.

While all of these factors could influence the JPY in extraordinary ways, we also have to keep in mind that other influences can as well.  Last week was a great example as to how general fear and greed in the stock market can bleed over to currencies and take everyone on a wild ride.  Japan will also be releasing some secondary data, the most important being Trade Balance and Manufacturing PMI, which could shake things up as well.  Regardless, the USD/JPY could be one of the more interesting currency pairs to watch for the coming week, month, and year.