The Japanese yen fell against the loonie yesterday following the release of unexpectedly weak industrial production and housing starts data for April. The Canadian GDP data for March was slightly better than anticipated. This enabled the Canadian dollar to gain ground against the yen. Overall, the CAD/JPY pair rose from a low of 102.15 to a high of 102.84 in the past 24 hours.
According to the preliminary data published by Japan’s Ministry of Economy, Trade, and Industry (METI), the country’s industrial production fell by 0.40% m-o-m in April following a 1.10% rise in the previous month, disappointing economists who were forecasting growth of 1.40%.
The reported figure reflects the first decline in industrial output since January, primarily driven by a 7.40% drop in production machinery. Iron, steel, and non-ferrous metals posted a decline of 1.10% in April. Transport equipment grew by 1.60%. Overall, the decline was primarily led by a drop in orders for chip-making equipment and flat-panel displays.
The production index stood at 95.50 at the end of April. While the shipments index fell by 0.40% to 93 in April, the inventories index rose by 0.30% to 104 in the same period. Also, the inventory ratio fell by 0.50% to 126.90.
On a y-o-y basis, industrial output declined 0.30% y-o-y in April 2023, mirroring the sixth successive period of decline, following a 0.60% drop in March.
In a separate news release, the METI stated that the country’s retail sales rose by 5% y-o-y in April following a 6.90% increase in the previous month but missed forecasts of a 7% growth. The reported figure reflects the 14th successive month of increases in retail trade as consumption continues to increase after the slump caused by the pandemic. The increase in retail sales was led by the automobile industry, which recorded a surge of 15.10%.
Drug and cosmetic retailers posted a growth of 7%. While department stores posted a rise of 6.90%y-o-y in April, food retailers posted an increase of 6.60% in the same period. Machinery and equipment retail fell by 6.90%. On a m-o-m basis, retail sales declined by 1.20%, reflecting the first decrease in five months.
According to the data published by the Ministry of Land, Infrastructure, Transport, and Tourism, Japan’s housing starts fell by 11.90% y-o-y in April to 67,250 units, followed by a 3.20% decline in the previous month, which disappointed economists who were forecasting only a 0.90% decrease in the reported period.
According to Statistics Canada, the country’s GDP stood almost unaltered in March, following a 0.10% rise in the previous month. While the service sector did not record any change, the goods manufacturing sector contracted 0.10%. Mining, quarrying, and oil and gas extraction recorded an increase of 1.20%m-o-m in March, reflecting the third successive month of growth.
The manufacturing sector contracted 0.60% in March, with decreases in both non-durable and durable goods production. Specifically, durable goods manufacturing fell by 1% in March. Likewise, non-durable goods manufacturing contracted 0.20% in the same period, mirroring a second consecutive month of decline.
The accommodation and food services sector contracted 2.20% in March, reflecting the steepest monthly decline since January 2022.
Retail trade fell by 0.80%m-o-m in March, while wholesale trade activity contracted by 0.60% in the same period.
The real estate, rental, and leasing industries inched up 0.30% in March, reflecting the quickest growth rate since February 2022.
Overall, Canada’s economy expanded 0.70% q-o-q in the March 2023 quarter.
Advance data published by the statistical organization indicates that Canada’s GDP inched up 0.20%m-o-m in April.
The weak Japanese economic data is expected to keep the CAD/JPY pair slightly bullish in the short term.
The historical price chart indicates that the CAD/JPY pair is ascending after forming a double bottom at 95.15. The next resistance is anticipated only near 109.70. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the CAD/JPY pair to remain in an uptrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
