The Effects of the Japanese Economic Indicators in Forex Trading

Learn in this article about the main Japanese economic reports and indicators including interest rates, inflation, employment and how they affect the Forex market.

The Japanese Economic Reports and Indicators


Interest Rates & Monetary Policy

ReportImpactBig PictureCurrency EffectDescription
BOJ Interest Rate DecisionMediumJapanese Economic Indicatorsif actual >
forecast,
bullish for JPY		Bank of Japan (BOJ) policy board members come to a consensus on where to set the rate. Traders watch interest rate changes closely as short-term interest rates are the primary factor in currency valuation.
BOJ Press ConferenceHigh if actual > forecast, bullish for JPYBOJ press conference looks at the factors that affected the most recent interest rate decision, the overall economic outlook, inflation and insights into future monetary policy decisions.
BOJ Governor SpeaksMedium if actual > forecast, bullish for JPYBOJ Governor is to speak. As head of the BOJ, which sets short term interest rates, he has a major influence over the value of the yen. Traders watch his speeches closely for subtle hints regarding future monetary policy and interest rate shifts.
BOJ Monthly ReportMedium if actual > forecast, bullish for JPYBOJ monthly report contains the statistical data that policymakers evaluate when setting interest rates. The report also provides analysis of current and future economic conditions from the bank’s perspective.
BOJ Monetary Policy Meeting MinutesMedium if actual > forecast, bullish for JPYAre a detailed record of the Bank of Japan’s policy setting meeting, containing in-depth insights into the economic conditions that influenced the decision on where to set interest rates.
Monetary Base (Y/Y)Low if actual > forecast, bullish for JPYMeasures the change in the total amount of domestic currency in circulation and current account deposits held at the Bank of Japan. An increasing supply of money leads to additional spending, which leads to inflation.

Inflation

ReportImpactBig PictureCurrency EffectDescription
Tokyo Core Consumer Price Index (CPI)MediumJapanese Economic Indicatorsif actual >
forecast,
bullish for JPY		Measures the change in the prices of a basket of goods and services purchased by consumers in Tokyo, excluding fresh food, and it is designed to measure price inflation.
National Core CPI (Y/Y)Low if actual > forecast, bullish for JPY Measures the change in the prices of a basket of goods and services purchased by consumers, excluding fresh food, and it is designed to measure price inflation.
GDP Price Index
(Y/Y)		Low if actual > forecast, bullish for JPYMeasures the change in the price of all goods and services included in the GDP, and it is the broadest measure of inflation and the primary indicator the BOJ uses to gauge inflation.
CGPILow if actual > forecast, bullish for JPYMeasures the change in the selling prices of goods purchased by Japanese corporations, thus measuring change in inflation rate from the perspective of the manufacturer and it is correlated with consumer price inflation.

Balance of Payments

ReportImpactBig PictureCurrency EffectDescription
Trade BalanceMediumJapanese Economic Indicatorsif actual
> forecast,
bullish for JPY		Measures the difference in value between imported and exported goods and services over the reported period. Trade surplus means that Japan is exporting more than its importing, which is good for yen.
Current AccountMediumJapanese Economic Indicatorsif actual > forecast, bullish for JPYMeasures the flow of goods, services, income and transfer payments moving into and out of a country. More money flowing into the country (a current account surplus) means more people have been required to buy yen. More money flowing out of country (a current account deficit) leads to currency depreciation because the currency is leaving the country to make payments in a foreign currency.
M2 Money StockMedium if actual > forecast, bullish for JPYMeasures the change in the total quantity of domestic currency in circulation and deposited in banks.

Employment

ReportImpactBig PictureCurrency EffectDescription
UnemploymentMediumJapanese Economic Indicatorsif actual >
forecast,
bearish for JPY		Measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month. The data tends to have a muted impact relative to employment data from other countries because Japanese economy is more reliant on the industrial sector than personal spending.
Average cash earningsLow if actual > forecast, bullish for JPYMeasures the change in employment income, including bonuses and overtime pay. Higher income is positive for consumption.

Economic Activity

ReportImpactBig PictureCurrency EffectDescription
GDP (Q/Q)HighJapanese Economic Indicatorsif actual >
forecast,
bullish for JPY		Measures the annualized change in the inflation-adjusted value of all goods and services produced by Japan.
BSI Large Manufacturing ConditionsMedium if actual > forecast, bullish for JPYMeasures the business sentiment in manufacturing, and is a key indicator of the strength of the Japanese economy, which relies heavily on the manufacturing industry.
Industrial Production (M/M)MediumJapanese Economic Indicatorsif actual > forecast, bullish for JPYMeasures the change in the total inflation adjusted value of output produced by manufacturers, mines, and utilities.
Tertiary Industry Activity (M/M)Medium if actual > forecast, bullish for JPYMeasures the change in the total value of services purchased by businesses, and is a leading indicator of economic health.
Retail SalesMediumJapanese Economic Indicatorsif actual > forecast, bullish for JPYMeasures the change in the total value of inflation-adjusted sales as the retail level and is the foremost indicator of consumer spending.
Leading IndexLow if actual >
forecast,
bullish for JPY		It is a composite index based on 12 economic indicators, designed to predict the future direction of the economy.
Machine Tools Orders (Y/Y)Low if actual > forecast, bullish for JPYMeasures the change in the total value of new orders placed with machine tool manufacturers.
Core Machinery Orders (M/M)Low if actual > forecast, bullish for JPYMeasures the change in the total value of new orders placed with machine manufacturers, excluding ships and utilities.
Manufacturing PMILow if actual > forecast, bullish for JPYMeasures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 representing expansion and below representing contraction.
All Industries Activity Index (M/M)Low if actual > forecast, bullish for JPYMeasures the monthly change in overall production by all sectors of the Japanese economy.
 Household spending (Y/Y)Low if actual > forecast, bullish for JPYMeasures the change in the inflation-adjusted value of all expenditures by consumers.
Housing Starts (Y/Y)Low if actual > forecast, bullish for JPYMeasures the change in the annualized number of new residential buildings that began construction during the reported month.

Confidence and Sentiment Reports

ReportImpactBig PictureCurrency EffectDescription
Tankan SurveyMedium  if actual > forecast, bullish for JPYSurveying some 10,000 + Japanese firms on their outlook, the Tankan is reported as a diffusion index, where negative responses are subtracted from positive responses, resulting in a net reading — the higher the Tankan index, the more optimistic the outlook.
Economy Watchers IndexLow if actual >
forecast,
bullish for JPY		 Measures the current mood of businesses that directly service consumers, such as barbers, taxi drivers and waiters, compiled from a survey of about 2000 workers. A reading above 50.0 indicates optimism; below indicates pessimism.
Household ConfidenceLowJapanese Economic Indicatorsif actual > forecast, bullish for JPYRate the relative level of overall economic conditions.

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