The Japanese economy came in below analyst expectations today for the fourth quarter of 2013. The Gross domestic product or GDP grew at 0.3 percent. Analysts expected it to come in at 0.7 percent.
While the GDP was weaker than we had expected, this does mark the fourth straight month of expansion for Japan’s economy. We also saw a pickup in consumption and in capital spending. These two factors are helping to support the Japanese economy as it is coming out of decades of stagnation.
Japan Exits years of Stagnation, Stimulus Imminent?
For a per annum basis the GDP drew at one percent in Q4. We had expected it to expand at 2.8 percent. There was a chance for a weaker number because we saw a decline in export data as well as a weaker than expected machinery order number. These two offset the rise in personal consumption and capital spending. Thanks to this weak data, our expectations that the Bank of Japan (BOJ) will add more stimulus into the economy is reinforced. We could see them inject ¥10 trillion this year to continue supporting the economic recovery.
At its last two day policy meeting, the BOJ elected to hold off on adding stimulus. They feel the monetary policy is already pretty big and did not feel the need to change it. This could change this month when they meet again. We have been anticipating addition stimulus soon in order to offset the impact of the imminent sales tax hike in April. We probably will not see stimulus till March or April though.
Markets Shrug off Weak GDP Data
The Nikkei 225 opened up 0.2 percent higher. The market is currently up nearly 95 points to 14,411.70. Gains seemed to be capped as investors might be, just beginning to worry, that momentum could be slowing in the Japan’s economic recovery. We are beginning to see signs they are bracing themselves for April’s sales tax raise. If we are seeing the momentum ebbing, then Prime Minister Shinzo Abe needs a boost.
The pending Trans Pacific Partnership (TPP) trade deal could be just the thing Abe needs to help to once again kick start the economy and push it even further. This data, that we have recently seen, is likely to refocus attention on Abe’s long term agenda towards the economic recovery plan as he is also determined to cut the corporate tax rate us well. This move is seen as critical in boosting corporate competitiveness. It will make Japan’s economy more attractive to foreign investment as well.
BINARY OPTION’S TAKE FOR THE DAY
While the GDP data was a bit concerning, we are seeing some boost in the Asian markets today which could spill over into the European markets as well. The USD/JPY also lost momentum today as is testing support at 101.60. We could see the yen continue to trade in a sideways pattern over the next few days, however the structure here remains weak for a di lower.
Now go to Trade Ideas for Today
Discussion:
As we see the economy in Japan continue to slow down we expect to see more stimulus. The Nikkei is locked into a bear market now targeting 13,700 and possibly even lower. What do you all think: will the Nikkei lose even more or will 13,700 hold bringing a bounce higher should we get stimulus?