In Japan – expensive currency, rising bond yields, lowering consumer spending

During trade session on Wednesday Japanese yen rose against the US dollar as a result of bond market volatility. USD/JPY pair shorted gains, lowering to 101.98 during Asian session, as it traded at 102.31 during late American session. US dollar stopped its expansion, which lasted three consecutive sessions. Government bonds yield rose by another 0.9%.

Haruhiko Kuroda, Bank of Japan Governor, stated today that there was no such thing as financial system, which could be protected against potential crisis and world economy was still experiencing negative effects, caused by the financial crisis. Current volatile situation in Japans bond market was a result of the huge asset purchasing measures by Bank of Japan.

Meanwhile, todays official data from Japan showed that consumers spent less during April. Retail Sales registered a drop by 0.1% during April annually, but showed improvement in comparison with previous period data, as the indicator decreased by 0.3% during April 2012, compared to April 2011. It was projected that Retail Sales will decrease by 0.4% during April in annual terms.

It became clear that behind these results was diminished demand of consumer electronics, which neutralized the rate of improvement in auto sales. Low temperatures during April caused also negative impact on demand of spring season clothing, while bad weather influenced sales. Recent drop in gasoline prices made its mark and led to weak sales results in petrol stations. Auto sales, on the other hand, rose by 1.2%, as this was the first annual increase since August 2012. Additionally, ceasing of government subsidies for purchasing automobiles with low carbon emissions during September 2012 also suppressed auto sales in Japan.