Market Drivers March 12, 2018
Corruption scandal hit Abe administration
FX treads water
Nikkei 1.65% Dax 0.56%
Oil $62/bbl
Gold $1320/oz.
Bitcoin $9500
Europe and Asia:
No Data
North America:
No Data
USDJPY started the week strong running towards the 107.00 figure in early Tokyo dealing, but news of a possible corruption scandal in Abe administration derailed the move and sent the pair tumbling back below 106.50 by morning London session.
A complex scandal involving a land sale to a well-connected businessman that was able to purchase government land at well below market prices, rocked the Abe administration on charges of cronyism. in a major admission, the finance ministry said it had altered related documents it submitted to parliament as part of the probe. The changes included removing the names of Abe, his wife, and finance minister Taro Aso. In addition, Abe and Aso’s names were nixed from an explanatory section about the school’s ties with far-right pressure group Nippon Kaigi.
On March 9, National Tax Agency head Nobuhisa Sagawa stepped down to take responsibility for the controversy. A few days earlier, a finance ministry official involved in the land sale was found dead from an apparent suicide.
Today the Mainichi newspaper reported that, according to senior government officials, dozens of passages in 14 related documents had been altered between February and April last year. In addition to the name removals, the use of the word “exceptional” to describe the land deal was also removed.
It’s difficult to handicap if Mr. Abe will survive the investigation which at first glance shows clear signs of corruption and cover-up. Although the scope of the deal appears to be small, and Mr. Abe does not appear to have personally profited from the deal and may yet survive the inquiry.
The news, however, casts a pall of doubt over Mr. Abe’s ability to govern well at a crucial time for Japan both economically and politically. Japan’s economy appears to be finally coming out of its decades-long deflationary slumber while at the same time facing key geopolitical risks with North Korea.
Political turmoil rarely has long-lasting impact on the FX market, and traders could still lift USDJPY through 107.00 before days end (as we have argued previously, there are several good reasons for a rally, including more hawkish Fed, continued expansion of US economy and lower risk with North Korea) but for now the pair is feeling the pressure of political pain and if the scandal news gets worse the pair could once again test support at 105.00
Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.