Japan to claim No 1 from China

The latest US TIC data report showed that both China and Japan boosted Treasury holdings in June. In fact, China’s holdings have dropped -$142.7b from the level at the end of June 2011. Japan went the other way; the country actually increased their holdings by +$237.8b over the same period. It’s no surprise that Japan is getting closer to toppling China as the largest foreign owner of Treasury’s. The gap stood at +$45b at the end of June, shrinking sharply from +$425.5b at the end of June this time last year. The Japanese are a net buyer of foreign bonds and with JPY turner lower once again and especially against the USD, flows in foreign bonds will likely continue.

Below are some other highlights of the week:

ASIA

• JPY: Japan’s economy expanded by a weaker-than-expected -0.3%, q/q in Q2. On an annualized basis, GDP rose +1.4% in Q2 and down sharply from the +5.5% rise in Q1. In nominal terms, GDP fell -0.1%, q/q in Q2.
• NZD: Kiwi retail sales rose +1.3%, q/q in the Q2, almost double the consensus estimate of +0.7%.
• AUD: Aussie NAB July future business confidence index rose to +4 in July from -3 in June, but the current business conditions index fell to -3 in July, compared with -1 in June. Separately, new motor vehicle sales fell -0.8%, m/m in July, compared with a -1% fall in June.
• MYR: Malaysia’s GDP surprised strong in Q2, rising 5.4%yoy or 1%qoq on a seasonally adjusted basis, well above consensus for 4.6%yoy growth.
• AUD: Aussie Westpac consumer confidence index fell -2.5%, m/m, to 96.6 in August, almost fully reversing the previous impressive +3.7%, m/m rise in July.
• CNY: Chinese Premier Wen Jiabao said easing inflation allows more room to adjust monetary policy and positive signs are emerging in the economy.
• AUD: The Aussie Melbourne Institute consumer inflation expectations index fell to -2.4% in August, following -3.3% in July. Separately, average weekly wages were up +0.4%, q/q in May, compared with +1.1% in April.
• NZD: The Business New Zealand PMI fell to 49.4 in July, from the revised 50 reading in June, the lowest level since 2008. Separately, ANZ job advertisements rose 0.7%mom in July, compared with a revised 1.1%mom fall in June.
• KRW: South Korea’s unemployment rate unexpectedly fell to a seven-month low as the jobless rate was at +3.1%(sa) in July, compared with +3.2% in June.

EUROPE Week in FX

AMERICAS Week in FX