The yen lost ground against the greenback yesterday following reports of an unexpected current account deficit for October. The US unemployment claim data was in line with expectations. This enabled the USD/JPY pair to strengthen from 136.30 to a high of 137.24 in the last 24 hours.
According to the data published by the Bank of Japan, the country’s bank lending rose by 2.70% y-o-y in November, following a 2.60% rise in the prior month and pleased economists who were expecting only a 2.20% growth in the value of loans released. The reported figure reflects the fastest rate of acceleration since May 2021 as enterprises increased loan intake to manage corporate activities and rising demand for property. The increased price of raw materials is also a key reason for a rise in bank lending.
Outstanding loans held by Japan’s top, regional, and “shinkin” banks were ¥592.47 trillion. Notably, top and regional banks recorded a loan growth of 3.10% and 3%, respectively, in November. In the case of “shinkin” banks, the loan growth was only 0.70%.
According to Japan’s Ministry of Finance, the country’s current account deficit was ¥64.10 billion in October 2022, compared with a surplus of ¥1.735 trillion in October 2021 and missed forecasts of ¥621.70 billion surpluses.
The country’s goods and services trade deficit was ¥2.597 trillion in October 2022, compared with a trade deficit of ¥448.10 billion in October 2021. In September, Japan recorded a current account surplus of ¥909.30 billion. Also, in the meantime, Japan’s primary income surplus increased 19% y-o-y to ¥2.826 trillion in October while the secondary income deficit was ¥292 billion.
Specifically, the goods trade deficit was ¥1.875 trillion versus a surplus of ¥159 billion last year. Exports grew 26.90% y-o-y to ¥8.989 trillion while imports surged 56.90% y-o-y to ¥10.865 trillion.
According to Japan’s Cabinet Office, the country’s economy shrank 0.20% q-o-q in the September 2022 quarter, following a GDP growth of 1.10% in the June 2022 quarter and a notch better than the 0.30% decline reported in the flash estimate. Economists did not anticipate any change in the flash data.
The reported figure reflects the first GDP contraction since Q3 2021, fueled by worldwide inflationary pressures and the weak yen. Notably, government spending rose by 0.10% in Q3 2022, a notch higher than the flat reading projected in the first estimate. Also, net trade with exports grew at a quicker rate of 2.10% instead of the 1.90% forecast in the flash estimate. However, private consumption growth eased to 0.10% in September 2022 quarter, compared with 0.30% in the June 2022 quarter. Business investment growth eased to 1.50% in Q3, compared with a 2.40% rise in Q2.
According to the US Department of Labor, the country’s first-time jobless claims increased to 230,000 in the week ended December 3, from 226,000 (upwardly revised from 225,000) unemployment claims in the earlier week but in line with economist’s estimate.
The four-week moving average was 230,000, up from 229,000 (upwardly amended from 228,750) in the previous week.
The unexpected current account deficit in October is expected to keep the yen slightly weak against the US dollar in the next few trading sessions.
The historical price chart indicates that the USD/JPY pair is rising after testing the support at 136.30. The next resistance is anticipated only near 138.80. Additionally, the stochastic indicator is ascending toward the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend in the days ahead.
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