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06/06/24
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JPY Flat Ahead of Household Spending
On Thursday, the Japanese yen was steady after swinging sharp throughout the week. USD/JPY traded at about 156.27, up 0.10% for the day in the North American session.
Consumers in Japan have been holding onto their purse strings tightly as inflation is still high and economic conditions are still grim. Household spending in March dropped to 1.2% m/m, down from February’s 1.4%. This downswing will likely continue, with the market estimate for April standing at only 0.2%.
On Monday, Japan will release its GDP report and the markets are getting ready for some bad news. It is expected the Japanese economy in the first quarter will have contracted. The market estimate is at -0.5% q/q, after the fourth quarter of 2023 showed no growth.
It is expected the economy will have contracted by 2.0% yearly, after gaining 0.4% in the fourth quarter. Exports are down and private sector demand has also dropped.
A weak GDP report may delay the Bank of Japan’s plans to tighten policy. The BoJ will next meet on June 14 and has indicated that it would make moves on the path toward normalization.
The Japanese currency is still at low levels and may drop further if the BoJ doesn’t alter policy settings at the meeting.
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