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Does Eco Watches Signal a Turn for Japan?

Last updated 4/8/2009 3:14 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Japanese Eco Watcher survey printed much stronger than forecast at 28.4 versus consensus calls of 20.9 as the worst economic contraction in Japan since World War II appears to be bottoming out. This was the third consecutive month of better than expected results from the survey suggesting that consumer demand may be finally stabilizing albeit at extremely low levels.

Although hardly market moving, the Eco Watcher survey – a poll of taxi drivers, waiters and barbers – is one of the more accurate gauges of Japanese consumer demand as it measures conditions on the frontlines of the country’s  economy.  Generally the survey tends to lead other consumer related Japanese data by several months indicating that perhaps we will see an improvement in spending as Q2 progresses.

With USD/JPY fully 1000 points higher than it was at the start of the year, the negative impact of higher exchange rates on Japanese corporate profits may be finally easing, creating a more positive mood in the overall economy. Granted, the Eco Watchers results remain at very low levels  indicative of near depression like behavior on the part of Japanese consumers. However, unless the survey readings begin to slide once again, they may be a signaling a turning point for the overall direction of Japanese consumer demand.

  USD/JPY May Hit 98

The market as usual ignored the data, with USD/JPY primarily trading on risk aversion flows as the Nikkei continued to correct some its massive March gains. Nevertheless, three consecutive months of better that expected  Eco Watchers readings suggest that Japanese economic conditions  on the ground may not be as dire as the current market consensus believes and unless they turn down once again, the worst may be over.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.