Japanese Yen Slides After Lackluster GDP Numbers

Japan is known for its large debt, which stands at more than $10 trillion. Today, the country released the second reading of economic growth. The number showed that the economy expanded by an annualized rate of 1.4%. This was in line with expectations and higher than the previous reading of -2.6%. On a QoQ basis, the economy expanded by 0.3%, which was lower than the expected 0.4%. On a positive note, the country’s GDP price index contracted by 0.3%, which is lower than the expected -0.4%. This number measures the change in price of goods and services included in the GDP. The capital expenditure rose by 2.4%, which was higher than the expected 1.8% while the external demand declined by a smaller margin.

The Japanese economic growth is lower than that of the United States and China, which have economic growth of 2.6% and 6.5% respectively. The country is also facing a major challenge with sluggish inflation despite being in full employment. The reason for this is that the country’s workforce is different from that of the other countries. This is because in other countries when the labor market tightens, the people tend to move to other companies in search of better wages. In Japan, they tend to stay in companies because of national pride. They also work for more hours, even without the overtime pay.

Another challenge for Japan is its shrinking population. The population, which is currently at 126 million people is expected to fall to 87 million in 2060. There are a number of reasons why the population is falling. First, young people are becoming increasingly isolated. Second, most Japanese live in cities where life is expensive. As such, couples tend to prefer having fewer babies they can support. Third, there has been an increasing entry of women to the labor force. Fourth, there has been a challenge for Japanese people to find high-paying jobs to support their families.

This year, the Japanese yen has been falling against the USD. The USD/JPY has risen from a low of 105 to above 111 as shown in the annual chart below. The pair is still below the yearly high of 114. Therefore, the pair could continue moving up, as the Japanese economy continues being sluggish at a time when the Fed is likely to have another hike. From a technical perspective, the 21-day and 42-day EMAs are crossing one another which is a sign that it will continue moving up.

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