USD/JPY: Japanese Deflation Leads the USDJPY to Move Northward

Japan’s Final Gross Domestic Product dropped to -0.9 percent in Q3, which left the estimate unchanged from Q2. Economists had on average expected the GDP contraction to be revised to a slightly better 0.8 percent decline. The slump in private consumption to 0.4 percent piloted the wane in the nation’s GDP and led to the deterioration of the Japanese yen by 3 pips as opposed to the American dollar in last Friday’s trades. The Yen is anticipated to continue to wane in today’s approaching Asian session as the BOJ is believed falling short on measures to save the nation from the current economic downturn.

The over cautiousness of the Bank of Japan seems to fail to end more than a decade of deflation, with the Policy Board under Governor Masaaki Shirakawa stepping down in April after doing too little during his term. Analysts say that the BOJ should have started its asset purchase program earlier and that the central bank became extremely passive in building inflation expectations. In effect, this year’s economic data have showed the resilience of the Japanese nation to move back to recovery as trade and industry have persisted to falter from the lack of assistance from the BOJ. More instability is added from the upcoming election seeing that criticisms and uncertainties roar loudly as the next leaders are seen to fail to give importance to the targeting of inflation.

Meanwhile, the US persists to strengthen as the job market has expanded; making more people believes that America has been showing solid momentum. The release of the US Trade Balance sees a revision upward as moderate job growth that’s strong enough to push the unemployment rate lower deters the amplification of industrial activity and production. As a result, the American nation is in a better position going into the fiscal cliff than if things had been deteriorating. Hence, the USDJPY pair is recommended pertinent to be bought

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