Japan Reports Higher Retail Sales

The Ministry of Economy, Trade and Industry reported Tuesday Japan’s retail sales increased 1.9% in January (2012) at ¥11.341 trillion in January (2012) compared to the same month in the previous year. This was better than the 0.1% decline analysts projected but less than December’s 2.5% gain. Large retailers saw their sales decrease by a seasonally adjusted 1.0% to ¥1.743. On a monthly basis, the country’s retail sales hiked 4.1% (seasonally adjusted) while economists were expecting a mere 1.0% rise after December achieved a minimal 0.3% monthly appreciation. Interestingly, car sales increased 24.0% in the month. Japan recently implemented subsidies amounting to ¥100,000 per car to raise sales.  Yet, wholesale sales came in lower 3.6% (on year) at ¥27.427 trillion and commercial sales depreciated 2.1% to ¥38.768 trillion.

In other news, Standard & Poor’s lowered Greece’s long-term “CC” and short-term “C” credit to “selective default” (SD) Monday after the country inserted collective action clauses in its debt documentation. The collective action clauses would bind all bondholders in a certain series to amended bond payment conditions pending approval by a quorum of bondholders. The credit rating agency saw the 53.5% writedown as disastrous to the country’s debt restructuring. "In our opinion, Greece's retroactive insertion of CACs materially changes the original terms of the affected debt and constitutes the launch of what we consider to be a distressed debt restructuring," the credit agency stated. "We believe that the retroactive insertion of CACs will diminish bondholders' bargaining power in an upcoming debt exchange." Additionally, since the downgrade the European Central bank has suspended Greek bonds from being used as collateral.

The EURJPY has climbed over 1300 pips in the first two months of 2012. We expect the Yen to regain its role as funding currency if the crisis in Europe is contained. If tomorrow’s LTRO auction is a success, we expect a risk rally that will push EURJPY higher towards 111.00. 

Eugene Ross, Analyst

Admiral Markets

At any use of the analytical material taken from a site of company Admiral Markets, and the secondary publication on any other resources, the rights to intellectual property for a dealing center «Admiral Markets», the reference to a company site is obligatory.