Japanese Yen Edges Lower on Mixed Economic Results

The Japanese yen edged a bit lower against the U.S. dollar on Friday, as the Japanese economy posted mixed results. At the moment, the greenback added 0.04% to its value to trade around ¥81.27. At the same time, the yen made some gains against the euro, as the European currency retreated 0.1% to ¥116.57. The yen failed to perform today as Japan's economy posted mixed results. For instance, Japan's current account surplus shrank by over 50% to ¥590.7 billion in May, but most analysts had expected a much bigger fall to ¥300 billion. Japan's exporters have been hit hard by energy shortages and supply disruptions, following the devastating earthquake and tsunami that have struck part of Japan. The May current account data indicates that the effects of the natural disasters are still felt on the Japanese exporters. At the same time, it seems as if the Japanese exporters are faring better than analysts had predicted. Japan's bank lending also failed to impress. In June, Japan's bank lending was 0.6% lower than in the same month a year earlier, which represents the 19th straight month of declines. The June value is an improvement on -0.8% recorded in May, but is still below analysts' expectations of -0.5%. Falling bank lending sends another sign that Japan's consumer confidence remains subdued. If Japan is to recover from the crisis caused by the double natural disaster, Japan's consumers will have to make a much bigger contribution. Even when supply disruptions and energy shortages problems are fully resolved, global demand will remain weak, as the Eurozone and the U.S. are fighting their own debt crises, so Japan's powerful exporters will probably not be able to bring Japan out of its current economic doldrums by themselves. If Japan's current account and bank lending data failed to impress, Japan's economy watchers current index certainly made an impression. In June, the index rose to 49.6, from 36 in May, which represents the biggest gain on record. The June value also managed to beat analysts' forecast of 40 by quite a margin. The index provides an insight into workers' views about the health of Japan's economy. Even though the June value is still below the 50 points line, which indicates Japan's workers are still pessimistic about the prospects of their economy, the latest data clearly indicates that Japan has managed to turn the corner and that its economic recovery is quickly gaining speed. Overall, the data published on Friday provided a mixed picture on the strength of the Japanese economy. While some data managed to beat analysts' expectations, suggesting the recovery is gaining ground, Japan's economy remains subdued. It has been fighting deflationary pressures and weak domestic demand for some time now, and with massive debt problems in the Eurozone and the United States, it seems unlikely that Japan's powerful exports sector will be enough for Japan to make a full recovery. ACTION ITEMS:

Bullish:
Traders who believe that Japan's recovery is quickly gaining pace, which should provide some tailwind for the yen, might want to consider the following trades:

• JPY/USD Exchange Rate ETN JYN is a long play on the yen. JYN should rise if the yen appreciates.

• ProShares Ultra Yen ETF YCL is another long play on the yen. YCL should rise more than JYN, if the yen appreciates, however.

Bearish:
Traders who believe that Japan has some way to go until making a full recovery, which should keep the value of the yen subdued for some time, may consider an alternate positions:

• ProShares UltraShort Yen ETF YCS is a short play on the yen. YCS should rise if the yen depreciates.

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