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Japan- yet another strong manufacturing PMI

The main figure of the Asian session was the Japanese manufacturing PMI. While it was already reported in late December as having grown from 51.3 pts to 51.9 in a preliminary release, the full report showed even more optimism of Japanese businesses. The index went up to 52.4 pts, with the monthly improvement in line with the pace observed throughout the whole 2H of 2016. The sentiment among enterprises is now at the upper bound seen since 2H of 2014.

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If Japanese goes higher from here it will send a signal that some troubles of the economy have been overcome; source: Macrobond, XTB Research

Such levels fit the message from Haruhiko Kuroda who head the Bank of Japan, that Japan is at a critical point in its fight against deflation and that he is more confident progress will be made in 2017 in this respect. He did not however suggest less dovish stance of BoJ now, cliaming instead that loose policy is still needed.

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Japanese market re-opened a day later than the US and two days after Europe after the New Year break; source: xStation5

Add to this that USDJPY managed to move a bit higher and the Nikkei225 2.5-percent surge is not that surprising. Remember that this market has been re-activated after the New Year break only today, so had some catching up to do vs. European and US equities which already had an opportunity to discount better business sentiment indicators (especially the ones from China, which helped to ease worries about this economy).

USDJPY is trading close to the trendline based on peaks observed in 2H of 2015, which is now around 118.

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 USDJPY may test a key resistance. source: xStation5



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