This sentiment came despite data that showed that Japanese GDP expanded for the first time since Q1 2008 during Q2 by 0.9 percent from the previous quarter, and by 3.7 percent from a year earlier. The improvement was almost exclusively the result of a 6.3 percent rebound in exports from Q1, and even though household consumption rose 0.8 percent, overall private demand dropped by 1.3 percent and domestic demand fell 0.7 percent. Furthermore, as part of the private demand component, capital investment - aka business spending - dropped by 4.3 percent, indicating that businesses remain cautious on the Japanese growth outlook. All told, even though the GDP results were right in line with expectations, investors are ultimately skeptical that an export-based recovery is in the works for trade-reliant economies like Japan, and that the Q2 results may be the best we'll see in 2009. This explains why the Japanese news did not help revive demand for carry trades and equities, and instead, risk aversion took its toll on the markets throughout the Asian, European, and US trading sessions. From a technical perspective, pairs like EURJPY, GBPJPY, NZDJPY have broken below trendlines that have served as support since early to mid-July, and given the signs of important turns in equities, there are serious downside risks for the JPY crosses in general.
Check out the Daily Fundamentals in its entirety for a look at what happened across the majors.
Related Article: Japanese Yen Weekly Trading Forecast
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