Derek Halpenny, European Head of GMR at MUFG, suggests that the details of the Tankan report released from Japan indicated that business sentiment held up a little better than many expected.
Key Quotes
“The Large Manufacturers’ diffusion index remained unchanged at 6 while the outlook index increased from 3 to 6. The Capex projection for the fiscal year also came in a little stronger than expected. However, the expected USD/JPY rate revealed in the survey was 111.36, down from 117.46 in the March Tankan but still considerably above the current spot rate below 103.00. In addition, it is also questionable how much of the Brexit aftermath was captured in the report – the sample period was 30th May to 30th June, but we can perhaps safely assume that most admissions took place prior to the Brexit vote result last Friday.
We don’t see this report as having much influence on decision-making on the timing of any additional easing by the BOJ. USD/JPY is really being driven by external developments at present with moves reflecting the general risk sentiment. That fact points to continued downside risks over the short-term at least.”
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