Japan March Manufacturing PMI at 50.4

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• China: MNI March Business Sentiment Indicator 58.2
• Japan March Manufacturing PMI at 50.4 (prior was 48.5)
• Japan factory production unexpectedly much lower, core CPI still shows deflation
• Amari: Wants to attend next week’s BOJ meeting
• Japan today – and a look ahead to next week
• Early Tokyo USD/JPY levels to watch
• WSJ article on US B52 flights over Sth. Korea to “demonstrate deterrence”
• Japan demographics: 30% of city dwellers will be 65-plus by 2040
• Article: Yamamoto on what he expects from the BOJ meeting
• Japan: Upper house of Diet to vote on stopgap budget today
• Overnight press: “Kuroda keeps up rhetoric on deflation”
• Nth Korea leader orders rocket units on standby to fire at US bases in the South and Pacific
• ForexLive Americas wrap March 28, 2013: S&P 500 closes at record high
• The Easter Parade
• GBP/USD pressing 1.5200
• The explosion behind the implosion in Cyprus
• Bersani told Napolitano he can’t form government
• NZD/JPY closes out strong quarter
• Deutsche Bank says to stay short EUR
• Countdown to the long weekend

China: MNI March Business Sentiment Indicator 58.2 Posted: 28 Mar 2013 06:48 PM PDT Comes in at 58.2 vs. the flash reading at 58.39 February was 60.98, 55.16 in January

Japan March Manufacturing PMI at 50.4 (prior was 48.5) Posted: 28 Mar 2013 05:59 PM PDT First expansion reading (>50) since May 2012

Japan factory production unexpectedly much lower, core CPI still shows deflation Posted: 28 Mar 2013 05:48 PM PDT Japan February preliminary Industrial Production -0.1% m/m (vs. +2.5% expected) Japan February preliminary Industrial Production  -11.0% y/y (vs. -8.5% expected) February CPI -0.7% y/y (vs. -0.7% expected) February core CPI -0.3% y/y (vs. -0.4% expected) February Unemployment rate 4.3% (vs. 4.2% expected) February Household spending +0.8% (vs. +0.1% expected) More details at Reuters

Amari: Wants to attend next week’s BOJ meeting Posted: 28 Mar 2013 04:45 PM PDT Japan’s economy minister Amari speaking to reporters in Tokyo Also: Says the BOJ is independent in choosing means of monetary policy

Japan today – and a look ahead to next week Posted: 28 Mar 2013 04:10 PM PDT We’re expecting a quiet session in Tokyo today (famous last words …) on the final day of the 2012 fiscal year. On Monday we get the release of the BOJ’s March Tankan business survey, and of course Wednesday and Thursday we have the first BOJ policy meeting with Kuroda, Iwata and Nakaso as new head and deputy heads, respectively. The announcement of money-dropping helicopter flights over Tokyo new policies will come on Thursday.

Early Tokyo USD/JPY levels to watch Posted: 28 Mar 2013 04:01 PM PDT USD/JPY has bids on the downside around the 93.80/90 level. Topside has offers around 94.40/50. The year-end yen repatriation that has weighed on USD/JPY and EUR/JPY (amongst other factors, of course) is trickling to an end, as is the fiscal year in Japan. There is only limited coverage from ForexLive today and Monday, so we may not be able to have these levels updated.

WSJ article on US B52 flights over Sth. Korea to “demonstrate deterrence” Posted: 28 Mar 2013 03:53 PM PDT The U.S. said it flew two B-2 stealth bombers on a training run over South Korea on Thursday as part of its war games, a move publicized to demonstrate deterrence as North Korea continues to threaten its neighbors and the U.S. The North has responded by ordering ‘rocket units’ of its army to standby to fire.

Japan demographics: 30% of city dwellers will be 65-plus by 2040 Posted: 28 Mar 2013 03:50 PM PDT Not everyone shares Abe & Co.’s view that deflation is all about monetary policy – some believe an ageing population is a huge challenge for overcoming deflation in Japan. This article takes a look at Japan’s demographics: Report: 30% of city dwellers will be 65-plus by 2040 A study by the National Institute of Population and Social Security Research estimates that by 2040, about 30 percent of the population will be 65 years or older in all prefectures, with the increase in the senior population most pronounced in urban prefectures.

Article: Yamamoto on what he expects from the BOJ meeting Posted: 28 Mar 2013 03:46 PM PDT Kozo Yamamoto, former finance-ministry official and veteran of Japan's LDP interview, in which he gives his views on what he expects from the BOJ next week, Key points: “I have very high expectations”  He believes buying government bonds with longer maturities would be the first thing to do On amounts: “I would buy an additional ¥5 trillion (about $53 billion) a month to bring up the total to around ¥160 trillion to ¥170 trillion (from ¥129.3 trillion as of February)” Interesting view on the exchange rate (my underlining): past data suggests that the yen could weaken to around ¥98 to the dollar and the Nikkei average rise to around 11600 if inflation reaches 2% On revising the BOJ law: Any serious debate should wait until after the July upper-house election, where an LDP victory could set the stage for any necessary revisions. In either case, I believe it's important that we build the legal framework for [holding the BOJ accountable for] inflation targeting before the next governor is appointed five years from now. BOJ Beat: Reflationist Lawmaker Has High Hopes for Bold Easing

Japan: Upper house of Diet to vote on stopgap budget today Posted: 28 Mar 2013 03:34 PM PDT Japan’s full 2013 budget is not likely to be passed until May, so this ‘stopgap’ budget is to be voted on to fund government spending from April 1. (See earlier report for details, but note the amount now is  ¥13.2 trillion). The lower house of the Diet passed the stopgap budget on Thursday, it is voted on in the upper house today. It is expected to pass.

Overnight press: “Kuroda keeps up rhetoric on deflation” Posted: 28 Mar 2013 03:29 PM PDT A report in the Japan Times of Kuroda’s appearance before the upper house of the Diet yesterday. Kuroda added nothing of significance yesterday (not a criticism, like us he’s waiting for the BOJ policy meeting for decisions to be made), the article is just a recap: Kuroda keeps up rhetoric on deflation Further report in the South China Morning Post

Nth Korea leader orders rocket units on standby to fire at US bases in the South and Pacific Posted: 28 Mar 2013 03:25 PM PDT In response to the flight of Stealth Bombers over South Korea on Thursday. Newswire reports of KCNA bulletin.

ForexLive Americas wrap March 28, 2013: S&P 500 closes at record high Posted: 28 Mar 2013 01:27 PM PDT Forex trading headlines from the US session: S&P 500 sets record closing high, up 6 points to 1568.94 Chicago PMI 52.4 vs 56.5 exp US Q4 GDP +0.4% vs +0.5% exp Initial jobless claims 357K vs 340K exp Canada Jan GDP +0.2% vs +0.1% exp KC Fed index -5 vs -3 exp Italian polls tight as govt nears impasse US lawmakers urge for China to be designated for trade secret theft OPEC crude output falls to lowest since Oct 2011 – RTRS poll CHF leads, AUD lags The overarching theme ahead of the long weekend was US dollar weakness. Position squaring and some worries and the slowing pace of the economy were the drivers. EUR/USD pressed offers in the 1.2840/50 zone but was unable to break through and drifted back to 1.2815. Cable climbed as high as 1.5201 but offers up to 1.5210 snuffed out the move. In general, the winners of the past month were the losers today and vice versa. That strongly suggests positions squaring at the end of the quarter with a long weekend looming. The upbeat close in the S&P 500 will be a positive factor for the general public as they digest the news over the holiday. Have a great weekend.

The Easter Parade Posted: 28 Mar 2013 12:37 PM PDT ForexLive will have limited coverage tomorrow and Monday so we can all take a little break.

GBP/USD pressing 1.5200 Posted: 28 Mar 2013 12:23 PM PDT Cable is challenging offers in the 1.5200/10 zone as the week winds down.

The explosion behind the implosion in Cyprus Posted: 28 Mar 2013 12:03 PM PDT The Economist’s Greg Ip interviewed former Central Bank of Cyprus leader Athanasios Orphanides, who explains how Cyprus ended up an international basket case. On July 11, 2011 there was an explosion that destroyed the power station producing more than half the power supply of the island. It was triggered by 100 or so containers of ammunition stored in the sun for two years next to the power station. The containers were part of a shipment going from Iran to Syria that was intercepted in Cypriot waters after a tip from the U.S. The president took the decision to keep the ammunition. Cyprus did not have a severe recession in 2009 from the global crisis. The slowdown was fairly mild. But after the explosion, the economy was thrown into a recession. The more important factor was the government’s unwillingness to ask for a Troika bailout earlier in the process. Orphanides said problems were contained but grew as leaders procrastinated.

Bersani told Napolitano he can’t form government Posted: 28 Mar 2013 11:19 AM PDT Napolitano told Bersani he will try to very the conditions for himself and see if a government can be formed. Bersani added that he’s faced unacceptable preconditions from other parties. No surprise as Italian politicians have said since election day they won’t be able to work together. The sooner the voters can sort this out, the better.

NZD/JPY closes out strong quarter Posted: 28 Mar 2013 10:49 AM PDT Friday also marks the end of the first quarter of 2013. The New Zealand dollar was the best performer in the three-month period, followed by the US dollar. The laggard was the yen. The NZD/JPY chart ran into some resistance at 80.00 but the break above the 61.8% retracement points to further gains ahead. NZDJPY quarterly chart

Deutsche Bank says to stay short EUR Posted: 28 Mar 2013 10:08 AM PDT Strategists at Deutsche Bank say capital controls in Cyprus are a “meaningfully negative” signal for the euro zone. Officials from Cyprus said the controls are likely to last for a month today after saying they would only last 7 days yesterday. They also cite increasing bank stress in the eurozone due to deposit flight and sovereign stress. Finally, they say Italy appears to be headed toward a second general election. They target 1.20.

Countdown to the long weekend Posted: 28 Mar 2013 09:50 AM PDT The bond market closes at the top of the hour and I don’t expect much movement from here.