When is Japan’s Q4 GDP and how could it affect USD/JPY?

Japan’s Finance Ministry is up for releasing the preliminary version of the fourth quarter (Q4) 2020 Gross Domestic Product (GDP) figures at 23:50 GMT on Sunday, early Monday morning in Asia. Following that Japan’s Industrial Production for December, up for publishing around 04:30 GMT on Monday, can also entertain USD/JPY traders.

Market consensus bears the burden of the coronavirus (COVID-19) outbreak while suggesting an easing in the output numbers from 5.3% QoQ to 2.3%. It’s worth mentioning that the Annualized GDP numbers are also likely to deteriorate from the 22.3% previous readings to 9.5% during the reported period. Further, the YoY figures for the Q4 GDP are no exception and can ease to 1.1% versus 1.2% prior.

Although policymakers from Tokyo are active in releasing the emergency funds to combat the fresh covid wave, BOJ is yet to produce any strong hints of further easy money policies. As a result, USD/JPY traders will keep their eyes on the GDP figures for a positive surprise despite little hopes.

Ahead of the event, Westpac said,

Q4 GDP is expected to show that Japan’s economic recovery continued over the three months to December, led by strong export growth (market forecast: 2.4%).

On the contrary, Reuters’ poll suggests,

Even if the economy rebounds at the estimated pace in the final quarter of last year, it will remain at roughly 80% the level before the pandemic struck in March.

How could it affect USD/JPY?

Although the Bank of Japan (BOJ) and Japanese diplomats are up for battling the covid-led economic pessimism, traders are cautiously optimistic over the GDP data. As a result, any positive surprise may probe the USD/JPY bulls if they manage to overcome likely contraction in Japanese Industrial Production, expected -3.2% YoY. It should, however, be noted that the jump in the US 10-year Treasury yields and the broad US dollar weakness may probe the USD/JPY bears from entering.

Technically, USD/JPY bulls are primed for refreshing the monthly top near 105.75 unless declining below a six-week-old support line, currently around 104.50.

Key Notes

USD/JPY Forecast: Bulls have chances as long as the pair holds above 104.40

About the Japanese Q4 GDP

The Gross Domestic Product released by the Cabinet Office shows the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a gross measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. A high reading or a better than expected number is seen as positive for the JPY, while a low reading is negative.