Working Paper: NBER ID: w15020
Authors: Yuko Hashimoto; Takatoshi Ito
Abstract: Market impacts of Japanese macroeconomic announcements within minutes on the dollar/yen foreign exchange are analyzed. High-frequency data collected from the actual trading platform, EBS, are used. First, impacts on returns are analyzed. Macroeconomic statistics releases that consistently had significant effects on exchange rate returns include Tankan survey (a short-term business survey conducted by Bank of Japan), GDP, industrial production (preliminary), PPI, CPI (Tokyo area), the unemployment rate and Balance of Payment statistics. Macroeconomic statistics releases that did not have impacts on returns include Trade Balance, Retail Sales and Housing start indicators. Second, for most of macroeconomic news items whose surprise components have return impacts also have impacts on deals and volatility. The announcement itself, in addition to the magnitude of surprise, is found to increase the deals and price volatility in the immediately after the announcement. In addition, some other items have no return impacts but deals and volatility impacts. These facts are consistent with a view that market participants have heterogeneous information, so that even without any price change, trades take place. Price discovery process may require some transactions with price fluctuations around new price level consistent with statistical announcement
Keywords: Japanese macroeconomic announcements; dollaryen exchange rate; high-frequency data; market reactions
JEL Codes: E44; F31; F41; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Surprise components of GDP (E20) | yen appreciation (F31) |
| Surprise components of Tankan survey (E69) | yen appreciation (F31) |
| Surprise components of industrial production (L69) | yen appreciation (F31) |
| Surprise components of trade balance (F14) | negligible effects on yen returns (F31) |
| Surprise components of retail sales (L81) | negligible effects on yen returns (F31) |
| Surprise components of announcements (E60) | influence transaction volume and volatility (F31) |