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Japan: May’s balance of payments data likely improved - BBH Sandeep Kanihama

Research Team at BBH, notes that the Japan reports May's balance of payments this week an there are strong seasonal patterns. Key Quotes“April consistently deteriorates from March, and May tends to improve upon April.  However, this time, the median guesstimate from the Bloomberg survey is for a small worsening.  The bulk of the deterioration can be traced to the trade balance.  However, due to size of the sums involved, the yen's strength has a larger impact on capital flows than trade flows. Japanese primary income surplus overwhelms the trade balance by orders of magnitudes. Separately, the Japan's MOF reports weekly portfolio flow data.  In the week ending June 24, the day after the UK referendum, MOF data shows foreigners sold a near-record JPY2.16 trillion of Japanese bonds.  It was the second consecutive week of sales.  It could be related to the end of the quarter, but it may also be related to a change in view on the yen (less bullish).  It may take a couple more weeks to sort out what is happening.  Japanese bond yields continued to decline last week.  The yield curve is negative for durations up through 15 years.  Reportedly, Japanese banks have stepped up their protestations to officials.” 



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