The Japanese yen is almost unchanged in the Tuesday session, after posting considerable gains on Wednesday. In North American trade, USD/JPY is trading at 113.26, down 0.02% on the day. On the release front, Japanese manufacturing data disappointed. In the U.S., PPI came in at 0.1%, above the estimate of 0.0%. Core PPI dropped to 0.3%, but beat the estimate of 0.1%. On Tuesday, the U.S releases CPI reports.
Japanese indicators continue to have a bad week. The BSI Manufacturing Index slipped to 5.5 in the third quarter, down from 6.5 in the second quarter. Preliminary Machine Tool Orders nosedived, with a reading of -16.5 percent. This was the sharpest decline since July 2016. Earlier this week, Final GDP in the third quarter declined 0.6%. This was the second decline this year. On an annualized basis, the economy declined by 2.5% in Q3, after a gain of 2.8% in the second quarter. This was the worst downturn since 2014.
Of particular concern, the capital expenditure component of GDP fell 2.8%, much weaker than the estimate of 1.6%. This capex slump, which could weigh heavily on growth and inflation, comes at a particularly inopportune time, with the U.S-China trade war in full swing. This has taken a bite out of Japanese exports and the manufacturing sector, as businesses that deal with the U.S or China are facing higher tariffs. A weaker eurozone economy has led to softer European demand for Japanese exports. Making matters worse, domestic demand remains fragile, as nervous consumers continue to hold tightly onto their purse strings.
Written by Admin
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