USD/JPY – Japan’s pace of growth faltered in Q2

on Aug 12, 2013
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**iNVEZZ.com, Monday 12 August:**

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After Japan’s Manufacturing PMI rose to its 2-year high of 52.3 in June, July’s release marked a four-month low of 50.7 with output having grown at its slowest pace since February. In the beginning of Q3 the goods-producing sector showed signs of cooling, indicating to economists a slowdown in Q2. Japanese Service PMI for July also pointed to a less positive number of GDP growth in Q2 as the index of business activity showed faltering pace of expansion after nine consecutive months of growth in the sector.

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The extraordinary stimulus program employed by BoJ in recent months has boosted Japanese exporters by decreasing the value of the yen. However, although July’s PMI data showed that new export volumes rose for a fifth consecutive month, the latest increase was only modest. The headwinds in China and emerging Asia have diminished the impact from the increased competitiveness of Japan’s exporters and resulted in the smallest increase of export volumes for the last five months.

As if further evidence were needed, Japanese Preliminary GDP for Q2 was today reported at a growth rate of 0.6 percent, falling short of analysts’ estimates for 0.9 percent and the prior period’s 0.9 percent, revised down from 1.0 percent. For Q2 y/y the number was also worse than market expectations, for a growth of 3.6 percent, by coming out at 2.6 percent. The first quarter reading was revised to 3.8 percent down from 4.1.

However the Preliminary GDP Price Index for Q2 y/y checked in at a negative 0.3 percent, beating the market forecasts for a drop of 0.7 percent and prior 1.1 percent decrease. The index measures the real growth rate of economic output and has provided some hope of fading deflation pressures as a result of Abe’s aggressive policies.
Japanese Corporate Goods Price Index for July y/y beat the market consensus for 1.9 percent rise with a solid reading of 2.2 percent, as against June’s growth of 1.2.

Japan’s Change in Capacity Utilisation for June m/m fell by 2.3 percent versus the prior period’s rise of 2.3 percent.
The USD/JPY initially slumped to 95.93 and 12 pips close to the 50-day low, yet at the start of the European session the pair is trading 0.57 percent up for the day to 96.85. While the Nikkei opened today slightly down, at 13,469.70, after Friday’s close at 13,615.19, and has been consolidating to the close at 13,519.43, down 0.7 percent today.
In the US, the Federal Budget Balance for July is scheduled for 19.00 BST, with analysts expecting a deficit of $94.0 billion compared to the $116.5 billion surplus in June.

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