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JAPAN IN WORSE RECESSION: YEN SUFFERS

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JAPAN IN WORSE RECESSION: YEN SUFFERS

Dec 8 2014, 10.05am GMT

STOCK.com

USDJPY is climbing again on data released from Japan this morning showing a contracting economy.

As the currency pair touched a new 7-year high, indices showed better results for Japan with the Japan25 [Nikkei] crossing the 18,000 mark for the first time since July 2007.

Japanese quarterly results of gross domestic product [GDP] fell to -0.5% from an optimistic expectation of -0.1% and a previous of -0.4%, bringing the annualized figure of GDP to -1.9%, a negative contraction from both the predicted -0.5% figure and the previous of -1.6%. GDP measures the change in the inflation adjusted prices of the total goods and services in the country.

As Prime Minister Shinzo Abe runs for this month’s election, his party the Liberal Democratic Party holds 294 seats in the 475-seat house. Opposition parties have not got either the funding or unity on policy to win over voters and most opinion leaders are predicting a win for Abe.

Having initiated a sales tax on the population in April, Japan is seeing less consumer spending and less company investment across the year, leading to contraction.

Private investment fell by 0.4%

Private consumption figure remained unchanged rising by 0.4%

Abe was going to introduce another consumptive tax but has postponed this policy for another 18 months from the initial date of October 2015. He will instead look to other fiscal policies to stimulate the economy.

Japan’s Adjusted Current Account, measuring the difference in value between imported and exported goods and services was recorded at 0.95T, above expectations of 0.46T and the previous figure of 0.41T.

Bank Lending year-on-year for November rose to 2.7% from 2.3%, whilst GDP Capital Expenditure (QoQ) (Q3) fell to -0.40%, away from the expected 0.80% and previous of -0.20%. GDP Price Index (YoY) fell to 2.0% from the forecast figure of 2.1%.

Though Japan’s recession is cutting deeper than expected, many analysts see Abe’s policies to stimulate the economy with an injection of 3 trillion yen in his new term as the rescue package that Japan needs.

MT4 chart: USDJPY – the yen fell against the dollar by 1.4%, following a negative week when the yen was down by 2.3%.

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MT4 chart: Japan25 – rising to a morning high of 18,129, the highest figure for 89 months.

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