JPY: Japanese Yen continues to decline in price

The Japanese Yen rate continues to give way to the USD at the Forex currency market on Thursday amid GDP data of the Country of the Rising Sun which turned out to be worse than expected.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY and is moving along the signal line, not giving a clear signal. Stochastic oscillator continues to grow in the neutral zone, trying to come into the overbought zone, thus confirming a pair buy signal.

Forex recommendations: if bullish sentiments for the pair are maintained and in case of breakdown at the level of 83.00, buyers’ targets will be the levels of 83.20 and 83.60.

The following Japanese data was released today:

– Real revised level of GDP in Japan declined by 0.3% on quarterly basis (-1.3% y/y) in February against preliminary level of -0.3% q/q (-1.1% y/y);
– Index of prices for corporate products rose by 0.2% m/m (+1.7% y/y) in February against the forecast of growth by 0.4% m/m.
Therefore, Japanese economy has reduced more than expected, which calls into question excessively optimistic statement of the authorities of the country about future outlooks.  Chairman of the Bank of Japan Mr. Yagamuchi said earlier that country’ economy shows signs of recovery: amid the growth of the developing markets, Japan also receives a catalyst to get out of hibernation.

According to the head of the Bank of Japan Mr. Shirakawa, excessive load on the short term inflation can harm price stability in the country: price stability itself is not the foundation of the economic stability; therefore Japan still requires accommodative monetary policy. Shirakawa also thinks that inflation of new bubbles shall be avoided. The data released yesterday showed decline in bank lending in February (- 2.0% y/y against -1.9% y/y in January; and the fall in current account balance in January: (-47.6% y/y (Y461.9 billion) against +30.5% in December).
According to Japanese observers worsening of political situation is a long term negative factor for the Japanese Yen; it especially concerns Prime-Minister of Japan, Naoto Khan. Khan’s positions had shattered after the resignation of the Minister of Foreign Affairs, Maekhara. First of all, in case of Khan’s resignation there will be difficulties in adopting the law of repayment of the considerable public debts of the Country of the Rising Sun. Khan brings forward a draft bill on the issue of government bonds. 

Interest rate of the Bank of Japan is at its lowest level of 0.1% per annum. The next meeting of the Bank of Japan is scheduled for 16 March. (Other meetings of the regulator will be held on 16 March, 8 April, 23 May, 15 June, 16 July, 15 September, 14 October, 14 November, 13 December).

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