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At the Forex currency market the Japanese Yen rate is traded upward on Monday; investors are hedging their risks in YPY because of the significant deterioration in the external background. At the moment even a possibility of new intervention does not remove tension in the pair.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, and goes up, giving a buy signal. Stochastic Oscillator goes down and is giving a sell signal.

Forex recommendations: in case of breakdown at the level of 77.00, the pair will go to ? 76.80 and 76.65. If downward breakdown does not take place, the pair will consolidate at the current levels.

The fact that traders started to buy the Yen trying to move away from risk only increases a chance that the Bank of Japan will instill new funds to the market to fight against expensive JPY because  it is one of the three objectives of a new Cabinet. It is possible that in the coming weeks, the new government will present a plan to stabilize the JPY, which can make the Yen weaker but not for long.                                  

At the meeting this week, the Bank of Japan decided to leave interest rate unchanged at 0.1% per annum. Changes in the monetary policy are not planned: program of buying assets and lending program will remain unchanged along with the exchange rate. In the follow-up comments the Central Bank noted that situation in Europe requires thorough attention and Japanese economy maintains the tendency to recover.

New Minister of Economy in Japan stayed in the office for only 8 days: he was dismissed because of his bad joke about radiation.

Statistics released this morning showed that real revised GDP in Japan fell by 0.5% q/q (-2.1% y/y) in Q2 against the forecast of -0.5% q/q (-2.0% y/y) and previous level of -0.3% q/q. Statistics released yesterday showed that bank lending fell by 0.5% in August against the decline of 0.6% in July. In addition, index of economical observers who monitor current situation fell to 47.3 points in August against the level of 52.6 points in July.

According to previous estimates of the Bank of Japan, real level of GDP will rise by 0.4% in the fiscal year of 2011 (forecast of April had been more optimistic: +0.6%). In the fiscal year of 2012, GDP growth is expected in the volume of 2.9% which would agree with the April forecast. Next year CPI is predicted to be at the level of +0.7%. Real GDP in Japan decreased by 0.2% on quarterly basis (-1.3% y/y) in Q2. GDP fell less than expected, and Minister of Finance of the Country of the Rising Sun said that next quarter Japan will demonstrate the rise of economy.

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