Over the last trading week that ended on August 1st, the Japanese Yen dropped by 0,81% amid weaker-than-expected economic figures from Japan coupled with strong figures from the USA. Still, on Friday, August 1st, the Yen gained 0,27% amid massive profit-taking by big-scale investors in advance of the weekend.
After facing the first sales tax hikes since 1997, the Japanese economy is currently seeing another economic slowdown. It is currently one of the worst developed economies.
The following data confirm the negative effect of the sales tax increase:
The industrial decline continued in June to hit -3,3% relative to May's figures. The year-ti-year decline is 3,2%. Meanwhile, the Japanese rate of unemployment increased from the low of 3,5% in May up to 3,7% in June.
The inflation pressure has been getting weaker in Japan for 2 months in a row due to a stronger yen and lower energy prices. June's inflation rate dropped by 0,1%.
The retail sales were down by 0,6% during the reporting period relative to the same reporting period of 2013.
The industrial PMI declined from 51,5 in June down to 50,5 in July 2014.
Still, the BOJ Governor Kuroda doesn't assume that the Japanese economy is currently facing a big-scale slowdown. Still he underlines that some of his colleagues do not share his point of view. He say the economy is still moving toward a more stable rate of inflation at 2,0%. Meanwhile, he says that the Japanese export is seeing a temporary decline due to weak economic growth in several Asian dragons coupled with weaker-than-expected economic recovery in the USA. The impact of the sales tax increase still matches the BOJ's expectations.
It should be noted that the current quarterly report season in Japan is more positive than the latest economic figures. The net profit shown by 316 Japanese companies listed on the Tokyo stock exchange boosted by 7,1% during the reporting period, which seems to be a good sign. On top of that, China, Japan's major trade partner, is seeing its industrial sector improving as well.
According to the Options Trading Department of Masterforex-V Academy, the fundamentals indicate an economic slowdown in Japan in Q2 2014 relative to the previous quarter. In long-term perspective, if the economic data from the USA are positive and the Fed is more inclined to toughen its monetary policies before mid 2015, the Japanese Yen is set to go further down in value against its American counterpart.
Technically, the Daily chart of USDJPY indicate a slight increase of the USDJPY futures within the scope of an ascending sloping channel. Even though the price broke the zone of increased demand on higher volume on July 30th, the sellers efforts remained vain. The buyers are currently trying to defend the level of support at 0,0097. In short-term perspective, the price is more likely to keep on rallying.
