special reports

Japan Recession Deepening As Industrial Production Sees Record Drop, Jobless Rate Rises

Friday, 26 December 2008 05:32:41 GMT  |  Ilya Spivak, Currency Analyst

Japanese economic data points to a deepening recession in the world’s second largest economy. Industrial Production dropped by the most on record in November, household spending shrank for the ninth straight month, and the number of available jobs to seeking applicants dropped to the lowest in nearly 5 years.

Key Overnight Developments

• Japanese Economic Data Points to Deepening Recession
• Euro, British Pound Edge Higher in Thin Holiday Trading


Critical Levels 



The Euro edged upward against the US dollar, testing as high as 1.4077 in overnight trading. The British Pound too saw buying interest, breaking above yesterday’s narrow range to come within a hair of the 1.48 mark.


Asia Session Highlights 



Japanese economic data continued to disappoint, pointing to deepening recession for the world’s second largest economy. The Nomura/JMMA Manufacturing PMI showed sentiment fell to 30.8 in December, the lowest since records began in 2004. The result echoes similar record declines in the Tankan Survey and the BSI Large Manufacturing metric as companies weigh up dwindling demand in the face of the global economic slowdown and the sharply higher Japanese Yen. Expectations of a leaner period ahead have moved firms to scale back production and cut capacity: initial estimates point to a record-setting -16.2% decline in Industrial Production in the year to November; meanwhile, the Jobless Rate ticked up to 3.9% while the ratio of available jobs to seeking applications dropped to the lowest in nearly 5 years. Naturally enough, scarce employment has seen consumers pare back spending, with annualized Household Spending shrinking for the 9th consecutive month and Retail Trade printing at the lowest in over a year.

The slower pace of economic activity has brought inflation sharply lower: the Consumer Price Index grew a meager 1% in the year to November, the slowest since April. The pace of price growth has declined a hefty 57% since peaking with commodity prices in July. Easing price pressure gives the Bank of Japan room to maneuver as they attempt to boost lending with aggressive new measures that look beyond lowering the already near-zero benchmark interest rate.


Euro Session: What to Expect 




To contact Ilya regarding this or other articles he has authored, please email him at ispivak at dailyfx dot com.

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars