Yen Steady, Nikkei Falls as Japan GDP Data Creates Risk Aversion

Talking Points:

• Yen showed a tepid reaction as the Nikkei 225 opened lower after Japan’s GDP figures
• Japan’s quarterly contraction indicates that the economy is in a technical recession
• The soft GDP numbers created risk-aversion in the early Asian trading session

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The Yen showed a tepid reaction against the US Dollar as quarterly GDP data from Japan showed the country is in a technical recession. The economy’s third quarter preliminary figure displayed a contraction of 0.2 percent which matched the prior revised reading but was below the 0.1 percent expected decrease. The annualized print disappointed as well. The markets’ forecasted a fall of 0.2 percent but received a drop of 0.8 percent instead. This was worse than the 0.7 percent revised decline in the last period.

This data created risk aversion early in Asia’s trading session. The Nikkei 225 index opened lower after the GDP figures were released. In regards to monetary policy, the Bank of Japan has noted that it is confident the current stimulus package can reach its desired goals without further expansion. According to overnight index swaps, traders are not expecting the central bank to alter its monetary policy stance over the next twelve months.

Comments from Japan’s Economic Minister Akira Amari after the data release:

• Excluding inventories, economy grew in quarter
• Business managers still have a deflationary mindset
• Expects economy may return to growth in fourth quarter