Japanese machinery product orders rebounded in February, largely due to a surge in demand for goods from abroad. On Wednesday (10 / April), Japan released a machine order (Machinery Orders) which recorded an increase for the first time in the past four months. On a monthly basis (Month-over-Month), Japanese machine orders increased 1.8 percent in February, after slipping to -5.4 percent in the previous period.

The increase was supported by manufacturing orders which recorded a 3.5 percent increase, following a 1.9 percent decline in January. The most significant surge was seen in overseas goods orders which grew 19 percent, rebounding from a sharp decline of 18.1 percent in the previous period. However, the expansion of engine orders, which amounted to 1.8 percent in February, was smaller than forecast by economists who predicted a rise of 2.5 percent. The results that missed these expectations reflected vulnerability and risked encouraging companies to cut business investment.

Rebounding machine orders is not as strong as initial estimates, so it will encourage Japanese companies to be careful because the future of their business is highly dependent on the global economy. In our view, Japanese growth tends to be rather slow. This is stated by Shuji Tonouchi, Senior Market Economist at Mitsubishi UFJ Morgan Stanley Securities.

The Risk of Trade War and Government Policy

Japanese manufacturers mostly sell their heavy machinery products to Chinese companies, so the development of the US-China trade war will always be the main spotlight of business people in Sakura at this time. Economists say that uncertainty over trade policies will hamper Japanese corporate capital spending, and could have a direct impact on 2019 economic growth. Another risk for the Japanese economy is the government's plan to increase sales tax from 8 percent to 10 percent in October. This was prepared because the Japanese government needed additional funds to increase the welfare budget. However, the increase in sales tax is feared to have a negative effect on consumer spending.

Movement of USD / JPY is Still Stuck

After the release of the Machinery Orders data, USD / JPY moved in the area of 111.141. The US dollar tried to recover from the previous day's decline which was triggered by investor hunting against the Yen as a safe haven. However, prices still seem to be struggling to erase the streak of losses that have occurred since the beginning of this week.

Factors That Weakened USD / JPY 

The US dollar weakened against the Yen in the trading session. Apart from the declining JOLTS data, traders also prefer Yen as a safe haven, after the United States announced to consider the application of duties on imported goods from Europe. In addition, the IMF has also just reportedly reduced the global economic outlook.

The number of job openings in the US fell sharply to the level of 7,087 million in February 2019. This figure was far below market expectations at 7,550 million. JOLTS data in January were revised up to 7,625 million, making the decline in the February JOLTS data even more significant. When compared with the data for the past year, this time JOLTS is the lowest since March 2018. However, the JOLTS data only has a medium impact on the US Dollar. The weakening of the US dollar against the yen was exacerbated by the issue of the latest US import duties and IMF Outlook. 

Yesterday, the US Trade Representative submitted a list of various imported goods from the European Union entering the US. These goods, which consist of commercial aircraft, dairy products, and Wine, are planned to be subject to import duties in return for subsidies imposed by the European Union on Airbus. The subsidy is considered to be detrimental to the US.