Japan’s Economy Expands More Than Expected to Test the BoJ

It is a busy Thursday morning on the Asian economic calendar. While Aussie trade data will draw interest later this morning, GDP numbers for Japan were in focus early in the Asian session.

According to the second estimate, the Japanese economy expanded by 0.7% in Q1, up from a prelim 0.4%. In Q4, the economy stalled. Year-over-year, the economy grew by 2.7% versus a prelim 1.6%. The economy expanded by 0.1% in Q4.

According to the Cabinet Office,

• Domestic demand rose 1.0% versus a first prelim 0.7%, with private demand up from 0.8% to 1.2%.
• Private non-residential investment contributed to the upward revision of GDP numbers, upwardly revised from a first estimated 0.9% increase to 1.4%.
• Consumption of households increased by 0.5% versus a first estimated 0.6%
• However, trade was a drag.

The latest numbers from Japan will likely fuel bets of a Bank of Japan tweak to its ultra-loose monetary policy guidance. However, inflationary pressures would need to soften for an actual tweak.

USD/JPY Reaction to Japan’s GDP Numbers

Before the GDP numbers, the USD/JPY rose to an early high of 140.226 before falling to a low of 139.956.

However, in response to the GDP numbers, the USD/JPY fell from 139.966 to a post-stat low of 139.864.

This morning, the USD/JPY was down 0.07% to 139.965.

Next Up

Australian trade data for April will move the dial. Following the unexpected slump in China exports, weak exports would support the view that the global economy is beginning to show the effects of synchronized central bank interest rate hikes.

Economists forecast the Aussie trade surplus to narrow from A$15.269 billion to A$14.000 billion.

Looking towards the US session, it is a quiet session. Initial jobless claims figures will draw interest. With hiring continuing to impress, a sharp increase in jobless claims would support a more dovish Fed pause in June. However, economists forecast jobless claims to increase from 232k to 235k.

While the economic calendar is light, no FOMC members are speaking today. The Fed entered the blackout period that ends on June 15.