Yen appreciates on faster economic growth
The Japanese yen gained early on December 8, 2015, as GDP (gross domestic product) figures were upwardly revised, reinforcing the stance of Bank of Japan governor, Haruhiko Kuroda, not to reduce the deposit rates further into negative territory. The upward release in the country’s economic growth dampened speculations of an increase in the central bank’s monetary stimulus. For more detail on Governor Kuroda’s speech on December 7, read Bank of Japan Rejects Need for Negative Deposit Rates.
Third quarter GDP expansion exceeds forecasts
GDP growth in the third quarter was revised to 1% on a YoY (year-over-year) basis, which tremendously exceeded expectations of 0.1% growth as well as the contraction of 0.5% in the previous quarter. The previous estimates stood at 0.8% growth on a quarter-over-quarter basis. The economy expanded at 0.3% in the third quarter against forecasts of flat growth and contraction of 0.1% in the second quarter. Thus, the initial estimates of a contraction of 0.2% were exceeded. The current account surplus was recorded at 1,458.4 billion yen in October.
Losses in crude prices contribute to gain in yen
The recent crude price fall after OPEC (Organization of the Petroleum Exporting Countries) decided to keep the production supply higher led investors to shift their money towards safe-haven assets. The Japanese yen, which has traditionally been seen as a safe-haven currency, benefited from this investment shift. The US dollar to Japanese yen pair ended lower by 0.36% at the end of the day. Going forward, the Bank of Japan’s monetary policy meeting next week coupled with the FOMC (Federal Open Market Committee) meeting will be important drivers to the currency pair movement going forward.
Impact on the market
Even after the release of positive GDP figures, the iShares MSCI Japan Index (EWJ) was trading 1.3% lower at the close of trade on December 8, 2015. In contrast, the WisdomTree Japan Hedged Equity (DXJ) ended negative by 1.8%.
Japanese ADRs (American depositary receipts) on US exchanges were trading on a negative note. Leisure goods maker Sony (SNE) ended lower by 2.0%. In the banking arena, Mitsubishi UFJ Financial (MTU) fell by 2.2% while Sumitomo Mitsui Financial (SMFG) fell by 1.8%.