JPY: Has Japan's economy taken a dangerous turn? – Nomura

Research Team at Nomura, notes that the Japanese real GDP growth turned down to -1.4% q-q annualized in 2015 Q4 and they see the contraction as due chiefly to sample bias with the Family Income and Expenditure Survey, which provides core data for GDP estimates.

Key Quotes

“By our estimate, underlying real GDP is likely to have held essentially flat q-q. We think it reasonable to say that the Japanese economy leveled out in Q4 after expanding 1.3% q-q annualized in Q3.

Recent yen appreciation and share price declines likely to lead to low growth in 2016 H1: We expect recent yen appreciation, share price declines, and falling crude oil prices to affect the Japanese economy from 2016 Q1. Yen strengthening has a particularly large impact; we estimate appreciation of ¥10 against the dollar depresses annual recurring profits at manufacturers (excluding their overseas bases) by about ¥6trn.

We have cut our estimate for real GDP growth in 2016 Q1 and Q2 to less than 1% q-q annualized to reflect the likely impact of recent market turbulence on capex and consumer spending. Although we expect the negative interest rate policy adopted by the BOJ on 29 January to have some effect in terms of weakening the yen and stimulating demand for funds, we think it unlikely to provide a major boost to the economy given such factors as the negative impact on earnings at financial institutions.

Concerns over global economic growth behind global financial market turmoil: We see global market turmoil since the start of the year as reflecting growing worries over fundamentals for the global economy. In our view, however, fundamentals do not actually appear to have deteriorated significantly. We look for downside economic risks to recede and the markets gradually to settle down as they factor in the positive effects of US economic signals and moves to step up policy responses in various countries. That said, if market turmoil persists, future growth rates could come down significantly.

Necessary condition for deferring consumption tax hike is continued high risks emanating from overseas: The view has been gaining ground among some in the market that the consumption tax hike scheduled for April 2017 could be deferred again in response to recent heightening risks of economic slowing. From a political perspective, we think such heightened risk would have to stem from increased overseas risk in order for the consumption tax hike to be deferred.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 


GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 


Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

Read more

DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News