Late yesterday UTC, the Bank of Japan released December’s M2 money supply, showing growth of 4.2 percent year-on-year and undershooting expectations for a 4.5 percent rise. The prior month was revised up 0.1 percent to a 4.4 percent increase. For December also, the M3 money supply rose 3.4 percent y/y.

Earlier today, the Japan Machine Tool Builders Association published its preliminary Machine Tool Orders y/y data, with a 28 percent increase in the year to December, markedly up from the prior 15.4 percent increase.

Initially today, the USD/JPY currency pair fell to what remains an intraday low at 104.08 but subsequently the quote rebounded to a five-day high at 104.46. After modest easing, the pair is currently trading at 104.38. Over the past few hours, the 104.40/45 range has been acting as resistance.

In the US today, the Producer Price Index for December m/m is due out at 13.30 UTC, with analysts picking a 0.5 percent increase. Any positive reading will break the losing streak of the past three months.

Nomura Bank is again going long the USD/JPY after in December buying the pair at 102.70 with a stop-loss order at 100.70. The take-profit was at 106.00 but Nomura’s trade missed the target by 55 pips and the bank booked just a 30-pip profit at 103.00. Now Nomura has set a one-month call with a strike at 105 for a gain of about 0.42 percent.

The bank says: “From our perspective, the trend for the Yen remains clear. Weak trade-related flows combined with increasing asset allocation by Japanese investors to foreign investments is a cocktail that is likely to push the yen gradually weaker.”

Nomura believes that the decreasing real interest rate in Japan was a key factor behind this process. There’s no need for a new catalyst from the Bank of Japan, the bank says. “The process is in motion, we just need it not to be disrupted.”

And it’s sanguine about political risk, writing that “we are not overly concerned about local politics in Japan. Abe remains popular, and we don’t think any specific local elections will materially change that. Hence, the trend is likely to remain in play.”