Summary:
The yen held steady Monday as data showed Japan's Q1 contraction was milder than expected, though the trade deficit still hinders recovery.
The yen was on solid a footing Monday as data showed Japan's economy contracted at a slower pace than initially estimated inQ1. Trade deficit remains a drag on the country's revival.
The BOJ should continue to proceed with monetary tightening, which would support ease yen's long-term weakness against the greenback and rebalancing of bilateral trade, the US Treasury Department said last week.
Governor Kazuo Ueda said the central bank will only raise interest rates after economic and price growth re-accelerate clearly. But stubbornly high prices are complicating its decision.
Japanese real wages fell for a fourth consecutive month in April, adding to concerns about Japan's growth outlook. It seems uncertain whether the pay hike major Japan firms agreed on in March will stem the decline.
For the first half of the fiscal year ending at the end of March, Japanese life insurance companies' hedging protection against the appreciation of the yen against overseas assets fell to the lowest level in 14 years.
In March, indicators measuring the strength of the yen against the currencies of major trading partners hit a half-year high largely due to the general weakening of the US dollar.
The yen continues to hover around 50 SMA, and a wedge pattern is shaping up – a sign of major breakout in the short run. For now, it looks neutral.
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