Japanese yen

As of mid-June, U.S. dollar/Japanese yen bulls have pressed the USD/JPY rate to the highest levels seen in 2005 — up to 109.70. However, some analysts believe the recent up move is running out of steam and the odds favor a reversal to lower levels in the months ahead — despite some strong economic numbers recently.

Analysts have pointed to signs of improvement in the Japanese economy as a factor supporting the yen. In the first quarter, GDP data surprised economists with an unexpected 4.9-percent annualized reading. Most market watchers had only expected a 2.6 percent gain.

“In general, things are looking more constructive in the economy,” says Robert Sinche, head of global currency strategy at Bank of America.

“Corporate sector balance sheets and profitability are looking quite solid.”

The Ministry of Finance’s most recent Financial Statements Statistics of Corporations by Industry report suggests Japan’s corporate sector is performing well despite higher oil prices and a slowdown in foreign demand.

On an all-industries basis, sales rose 1.5 percent quarter-on-quarter, the fastest growth in three quarters.

Also, Sinche points out “nominal wages were actually up on a year over year basis [this spring]. For years households have been looking at declining nominal wages.”