15 Feb 2016
JPY: Weak GDP report supports further BoJ easing expectations - MUFG
Lee Hardman, Currency Analyst at MUFG, suggests that the yen has weakened in the Asian trading session undermined both by the improvement in global investor risk sentiment and release of the weaker than expected GDP report from Japan.
Key Quotes
“The improvement in global investor risk sentiment and weaker yen has resulted in the Japanese equity market rebounding sharply with the Nikkei225 index up just over 7.0% today.
The Japanese GDP report which was released overnight was disappointing. It revealed that the Japanese economy contracted more sharply than expected by an annualized rate of -1.4% in Q4. For the calendar year as whole Japan’s economy expanded by 0.5% representing only a modest acceleration to around potential growth after no growth in 2014. The economy has now contracted in four out of the last seven quarters since the consumption tax was increased in Q2 2014.
Personal consumption growth remains disappointing contracting again by -0.8% in Q4. Weakness in durable goods consumption is particularly notable having declined for four consecutive quarters in 2015 and in six out of seven quarters since the consumption tax was increased which is having a prolonged negative impact.
One bright spot was stronger than expected capital investment growth which expanded by 1.4% in Q4 and added 0.2 percentage point to real GDP growth. Recent negative developments have further increased downside risks to the outlook for economic growth increasing pressure on the BoJ to ease monetary policy further. The increasing probability of further BoJ in March should continue to weigh on the yen.”
Key Quotes
“The improvement in global investor risk sentiment and weaker yen has resulted in the Japanese equity market rebounding sharply with the Nikkei225 index up just over 7.0% today.
The Japanese GDP report which was released overnight was disappointing. It revealed that the Japanese economy contracted more sharply than expected by an annualized rate of -1.4% in Q4. For the calendar year as whole Japan’s economy expanded by 0.5% representing only a modest acceleration to around potential growth after no growth in 2014. The economy has now contracted in four out of the last seven quarters since the consumption tax was increased in Q2 2014.
Personal consumption growth remains disappointing contracting again by -0.8% in Q4. Weakness in durable goods consumption is particularly notable having declined for four consecutive quarters in 2015 and in six out of seven quarters since the consumption tax was increased which is having a prolonged negative impact.
One bright spot was stronger than expected capital investment growth which expanded by 1.4% in Q4 and added 0.2 percentage point to real GDP growth. Recent negative developments have further increased downside risks to the outlook for economic growth increasing pressure on the BoJ to ease monetary policy further. The increasing probability of further BoJ in March should continue to weigh on the yen.”