The Japanese yen remained range-bound against the greenback yesterday following the release of weak economic data from the US and Japan. While Japan’s economy contracted in the second quarter, the US wholesale inventories increased in April. Overall, the USD/JPY pair traded in a range of 132.92 and 134.13 in the past 24 hours.
According to the Bank of Japan, the country’s bank lending rose by 0.70% y-o-y in May, following an increase of 0.90% in the prior month, and a notch lower than the 0.80% growth anticipated by economists.
In value terms, Japan’s bank lending was ¥582.524 trillion in May. Excluding trusts, bank lending increased at a yearly rate of 0.90% y-o-y to ¥506.387 trillion, after rising 1% in the prior month.
Lending from trusts declined 0.40% to ¥76.136 trillion after falling 0.10% in the earlier month. Lending from overseas banks surged at a yearly rate of 1.40% to ¥3.430 trillion, expedited from the 0.70% rise in April.
Japan’s current account surplus was ¥501 billion (or $3.77 billion) in April, a decline of ¥628 billion from the ¥1.56 trillion reported in March, as per data published by the Ministry of Finance. The reported figure, reflecting the third consecutive month of surplus, was better than the ¥400 billion anticipated by economists. Notably, the current account surplus has been declining consecutively for the past four fiscal years.
The decline was primarily due to record imports that eclipsed exports, pushing the trade balance into the negative zone and raising doubts about the long-term buying power of the country.
The rise in fuel costs has increased cumulative imports by 32.80% on a y-o-y basis, eclipsing export growth driven by steel and automobile shipments.
According to Japan’s Cabinet Office, the country’s economy contracted 0.10% q-o-q in the March 2022 quarter, but bettered the 0.30% GDP decline anticipated by economists. The initial estimates pegged the decline at 0.20%.
On an annualized basis, as per the amended figures provided by the Cabinet Office, the country’s GDP shrank 0.50% (annualized) in the three months through March. The preliminary reading pegged the contraction at -1%. Economists had anticipated a 1.10% decline. The improved reading was basically due to the economic rebound in the final leg of the first quarter. Also, upward revision in private inventories was another main factor that assisted in the decline of the contraction.
Analysts anticipate Japan’s economy to register modest growth in 2Q 2022 as COVID-19 (omicron strain) related prohibitions have been lifted.
According to the US Census Bureau, the country’s final wholesale inventories increased 2.20% m-o-m to $861.80 billion in April, following a 2.70% rise in the prior month, and a notch higher than the 2.10% growth reported in the preliminary reading. Economists did not anticipate any change in the initial reading.
The reported figure reflects 21st successive monthly gains led by 2% rise in the stocks of durable goods and a 2.4% increase in non-durable goods. On a y-o-y basis, wholesale inventories surged 24% in April, also higher than the prior reading of 23.80%.
The weak economic data from both the US and Japan is expected to keep the USD/JPY pair range-bound in the short term.
The historical price chart shows that the USD/JPY pair is rising after testing the support at 129.75. The next resistance is expected near 135.10. The pair is trading above its 50-day moving average, while the stochastics indicator is in the bullish zone. Therefore, we are expecting the currency 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.
