The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥110.35 level and was supported around the ¥107.45 level. The pair gained about 250 pips last week. The Nikkei 225 stock index gained 0.33% on Friday to close at ¥13,168.41. New finance chief Ibuki said “it’s hard to move now” on interest rates. LDP’s Aso said the Japanese economy is in recession. Economic minister Yosano foresees a supplementary budget to stimulate the economy. Ibuki sees cost-push stagflation. The government downgraded its assessment of the economy and removed the word “recovery” for the first time in 56 months. April – June GDP will be released next week. Swaps are signaling a slight chance that rates could be higher this fiscal year.

Data released in Japan this week saw June machinery orders were off 2.6% m/m; the June composite index of leading economic indicators fell 1.7 points to 91.2 in June; the July economy watchers’ survey fell to 30.8; and July bank lending was up 2.0%.
In Chinese news, the Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8588 in the over-the-counter market, up from CNY 6.8425. Goldman Sachs sees July CPI growth moderating to 6.6% y/y. China loosened capital controls significantly. The government sees Q3 GDP growth around 10.2% y/y with CPI up 6.6% y/y.
Data released in China last week saw Q3 CPI was up 5.5%.