Japan’s household spending dropped 6.6% in February and USD at one-week low due to

•　JPY declines as February household spending drops 6.6%
•　USD at one-week low due to retreating bond yields
•　US expressed concerns over Vietnam due to its currency manipulation
•　Remittances to Mexico rose to record high for February

JPY kicked off the new trading week in the positive territory but declined since today from Monday’s top due to heavy drops in household spending, with JPYUSD currently trading at 0.0091. The 6.6% drop in February on household spending is the third downward month in a row. Average spending by households of two or more people was ¥252,451 ($2,300). Other economic data released earlier include retail sales for February which declined 1.5%. During March, JPY lost 3.87%, marking the worst monthly performance since November 2016. As a relatively stable currency, JPY is particularly sensitive to rate differentials. As a result, JPY has responded with sharp losses to rising US yields and USD. Last week, USDJPY rose to 110.96, the highest level in the past 12 months.

On last Friday, US nonfarm payrolls delivered an impressive reading at 916k, up from 468k in the prior month. The figure beat the forecast at 647k, showing strength of the labor market. Investors are expecting that, as Biden administration pouring trillions of dollars into the economy, nonfarm payrolls could exceed the one million level. Moreover, US unemployment rate dropped from 6.2% to 6.0%, in line with consensus and is the lowest level since April 2020. On the FX front, the DXY Index was up on Friday through Monday, but declined sharply since then, currently at 92.68 at press time. The sharpy decline was primarily due to the declining bond yields.

US expressed concerns over a call on Vietnam’s currency practice. Last December, the US Treasury Department has labeled Vietnam as a “currency manipulator” due to its growing global currency account surplus and heavy intervention in the FX market to hold down its currency value. The trade surplus with the US has been growing quite largely, but the US has not yet taken actions to impose punitive tariffs.

Remittances sent to Mexico rose to record high since 1995 in February, totaling $3.174 billion, compared to $2.732 billion in last year’s February. Remittances have long been a major support for the country’s economy and the source is usually Mexican immigrants living in the US. Remittances usually contribute to economic growth through lifting consumption, savings and investment. However, it could also negatively impact the incentives to work and thus labor force participation.