FXStreet (Bali) - According to Nomura FX Strategists, corporate flows should remain JPY negative going forward.

Key Quotes

"While Japanese exports have been lacklustre even after JPY weakness, sales volume of foreign subsidiaries of Japanese firms remains relatively strong, according to the quarterly survey of overseas subsidiaries released by the METI last week."

"May real exports declined by 3.8% m-o-m, as exports of transport equipment declined substantially (-7.2%, see "Japan trade statistics: May 2014", 18 June 2014). Thanks to weaker imports after the consumption tax hike in April, trade deficits have started shrinking, but weak export momentum is slowing the recovery in trade balances. Even though the BOJ has upgraded its overseas economic assessment slightly at the latest meeting, Governor Kuroda acknowledged the recent weakness of export momentum during his press conference."

"However, the quarterly survey suggests that the sales volume of overseas subsidiaries increased in Q1 from the previous quarter by 3.4% in JPY terms and by 0.9% in USD terms. Overseas subsidiaries' sales from Japan declined by 3.6% in JPY terms over the same period, while both sales from domestic countries (e.g., US subsidiary's sales from the US) and the third countries (e.g., US subsidiary's sales from Europe) rose. Transport equipment industry, which accounts for more than half of total sales of overseas subsidiaries, recorded a strong increase in sales (+8.6%). Japanese companies have been increasing the share of overseas production, which is likely to be gradually widening the gap between exports and sales volume of overseas subsidiaries."

"Japanese companies still plan to increase the overseas production ratio, which would slow the recovery in exports and trade balances going forward. As a result, JPY selling from importers is likely to remain stronger than exporters' JPY buying flows. On top of that, FDI outflows generated by the increase in the overseas production ratio will be JPY negative going forward and result in negative corporate flows, in our view."

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
Trading Center