Japanese Yen Holds On Despite Huge 4Q GDP Plunge
Japanese Yen, Japan Gross Domestic Product Data, Talking Points:
- Japan GDP growth took a big hit as 2020 bowed out
- The statistics agency points at typhoon impacts and the imposition of higher sales tax
- However economists will worry that Japan was ill-prepared economically for coronavirus
The Japanese Yen moved very little on Monday despite news of a big fall in growth for its home country, well ahead of expectations. This relative torpor is probably explained by the fact that monetary policy is already ultra-loose in Japan and likely to stay that way irrespective of the data.
Official Gross Domestic Product for the final calendar quarter of 2019 fell by a huge 6.3%, annualized and seasonally adjusted, nearly double the 3.8% slide expected and massively below the 1.8% rise seen in the third quarter. This is the worst showing for this series since 2014.
The seasonally adjusted quarterly fall was 1.6%, worse than the 1% slide expected. Private consumption and business spending were both sharply lower.
The Japanese statistics agency cited both the impact of typhoons and the imposition of sales tax as reasons for this woeful performance but market watchers are likely to be very concerned at the underperformance which has come in the very months before coronavirus hit.
Still, the Bank of Japan is already committed to extraordinary stimulus until inflation hits 2% and stays there. These data only underline how difficult that task will be, but the Yen has long done without the sort of data impact other currencies see as the link between the numbers and the policy response has been effectively cut.
As USD/JPY’s daily chart shows the US Dollar has been winning this ‘battle of the havens,’ with its 2020 uptrend still in place. However the greenback seems to be running out of steam short of January’s highs, but the long-term downtrend from 2015 remains very much in Dollar bulls sights.
On pure interest-rate comparison alone there would seem very little reason to favor the Yen, especially with such weak Japanese data suggesting that it will carry miserly returns for the foreseeable future.
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--- Written by David Cottle, DailyFX Research
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