The Japanese yen declined against the greenback in the Asian session yesterday following the release of worse-than-anticipated GDP data for the September quarter. The upbeat JOLTS data released later in the day enabled the US dollar to consolidate its gains against the yen. Overall, the USD/JPY rallied from a low of 112.75 to a high of 113.95 in the near term.
As per the data published by the Bank of Japan, bank lending rose by 0.60% y-o-y in November, following a growth of 0.90% in the earlier month and a notch lower than the 0.70% expansion anticipated by economists. The decline in bank lending signals the easing of finance-related issues faced by corporates as the economy rebounds from the jolt caused by the pandemic.
Furthermore, the decrease suggests that large enterprises are repaying the loans received last year, while shunning away from new loans. This signifies that the economy is slowly returning to normal.
The info will be among other criteria that policymakers at the Bank of Japan will study before deciding to reverse emergency lending programs introduced in 2020 to manage the pandemic’s early damage.
Outstanding loans held by Japan’s four key categories of banks, including “shinkin” or credit unions, were a historic high of ¥577.075 trillion ($5.08 trillion). Loans by top banks declined 1.10% in November, higher than the 0.70% decline in October.
According to the data published by the Japanese Ministry of Finance, the country’s current account surplus fell to ¥1.018 trillion in October 2021, from ¥1.948 trillion in October 2020, and surpassed market forecasts for a surplus of ¥1.308 trillion. The current account surplus recorded a 16th successive month of surplus, aided by robust primary income, including returns on foreign investments.
The goods account surplus plummeted to ¥166.70 billion, from ¥950.30 billion in October 2020. Exports surged 11.70% to ¥7.10 trillion. Imports increased 28.30% to ¥6.90 trillion. The increase was led by an 80.10% surge in steel prices and also a 45.10% increase in semiconductor producing machinery against the backdrop of a worldwide chip scarcity.
In the meantime, the services account gap widened to ¥575.40 billion, from ¥363.90 billion. During the same period, the primary income surplus increased to ¥1.780 trillion in October 2021, from ¥1.590 trillion in the comparable period last year. The secondary income gap narrowed to ¥191.50 billion, from ¥234.20 billion.
Overall, the country’s trade balance was ¥166.70 billion, reflecting the first surplus in three months, but stood 82.50% lower than ¥950.30 billion recorded in the comparable period last year.
The service balance was a deficit of ¥575.40 billion, an increase from ¥363.90 billion last year, as royalty payments to overseas firms by Japanese companies recorded an increase.
The country’s primary income balance increased 11.50% to ¥1.80 trillion, reflecting the seventh consecutive rise.
According to the Cabinet Office of Japan, the country’s final GDP contracted 0.90% q-o-q in the September quarter, following an expansion of 0.40% in the June quarter. The initial estimates pegged the economic contraction at 0.80%. Economists did not anticipate any change in the initial estimates. The reading reflects the fifth contraction in the last eight quarters. The IMF (International Monetary Fund) forecasts Japan’s growth rate to remain the slowest among G7 nations in 2021 and 2022.
As the data indicates, the country’s economy contracted at a quicker pace than forecast in the prior quarter against the backdrop of a summer increase in Covid-19 cases that forced the government to impose emergency prohibitions.
In the quarter ending September, the country’s GDP shrank at an annualized 3.60%, with a larger decline in consumer spending bolstering losses. Economists had anticipated a 3.10% overall drop, compared with the government’s initial 3% forecast.
According to the Job Openings and Labor Turnover data (JOLTS), the job openings in the US market stood at 11.033 million at the end of October, an increase from 10.60 million in the prior month and surprised economists who were anticipating a decline in the job openings to 10.45 million. While hires remained almost unaltered at 6.50 million, aggregate separations inched down to 5.90 million.
The accommodation and food services sector recorded an increase of 254,000 jobs. Non-durable goods manufacturing posted a rise of 45,000 jobs. Educational services reported a growth of 42,000 jobs. On the contrary, job openings fell by 115,000 in state and local government, devoid of education.
The hiring rate remained unaltered at 4.40%. Hires fell by 96,000 in finance and insurance. Hires rose by 54,000 in educational services. State and local government education recorded an increase of 37,000.
The weak economic data from Japan and upbeat JOLTS data from the US are expected to keep the USD/JPY pair range-bound with a slight bullish bias in the short term.
The historical price chart indicates that the USD/JPY pair is trading above its 50-day moving average. Additionally, the MACD indicator has a positive reading. The currency pair is also having strong support at 112.75. The next resistance is anticipated only near 115. Therefore, we are anticipating the currency pair to remain in an uptrend in the days ahead.
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