Japan Cabinet Office cuts capex view but says economy recovering

Japan’s Cabinet Office is out with its latest monthly economic assessment report for January, which showed a slightly softer assessment than in December, when it said capex was increasing moderately but with weakness seen in machinery investment.

Key Quotes:

“The economy is recovering at a moderate pace, while it is showing weakness centered on manufacturers ... amid continued softness in exports.

Capital spending was on the trend of moderate increase but it showed some weakness.

Weak external demand weighed on factory output, which prompted companies to rein in capital spending.

The government maintained its view on factory output, saying it was “weakening further”.

It also said exports were weakening.

The economy was expected to continue recovering moderately thanks to government stimulus measures, with the labor and wage environments improving, although weakness remains.

The government will closely watch the prospects for China’s economy, Brexit and the situation in the Middle East, which could impact on financial markets, as well as the impact of Japan’s sales tax hike.”

FX Implications:

The Japanese government’s economic assessment had little to no impact on the local currency, as the yen extends its latest uptick across the board. The USD/JPY pair is seen tracking the retreat in the S&P 500 futures and Treasury yields, now trading with small gains at 109.95.