Japan in recession again

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GDP figures confirmed what many feared: Japan has entered yet another recession after the economy contracted for two consecutive quarters: in Q2 and Q3.

The data for Q3 showed a quarterly squeeze of 0.2% worse than -0.1% expected. Q2 was revised up to -0.2%, but this remains negative. Seasonally adjusted and annualized GDP stands at -0.8%. Will the BOJ act this week? Not so fast.

The so-called silver lining of the report is that in nominal terms, the economy didn’t squeeze. Due to a stronger than expected GDP deflator, 2%, we had the squeeze. The deflator is important for the Bank of Japan that focuses on inflation: a 2% y/y rate of price rises that erodes growth is not bad news for Tokyo.

So, we may see a supplementary budget from the government to stimulate more growth, especially as investment is lacking, but outright easing does not seem to be on the cards. The BOJ had its chance to act on October 30th, with the semi-annual outlook, and didn’t budge.

The Japanese yen actually went in the other direction: it strengthened in the wake of the new week. This can be attributed to the risk-off atmosphere in markets following the Paris Attacks on Friday and the ongoing tension in France, Belgium and Syria.

And after the initial risk aversion, USD/JPY seems to be returning to range:

USDJPY November 16 Japan recession Paris Attacks

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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