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Japanese Yen Unfazed by Fake News Scandal, Recession Risks

January 29, 2019 at 16:32 by Andrew Moran

1,000 yenThe Japanese yen is modestly strengthening against a basket of currencies on Tuesday, despite a fake news data scandal hitting Tokyo and economists increasing the odds of a recession hitting the world’s third-largest economy.

Japan’s economy is making history as it is experiencing the longest expansion phase since the end of the Second World War. Because of admirable domestic demand and an improving labor market, Tokyo is set to record its 74th straight month of advancement as the economy is “recovering at a moderate pace.”

Critics contend, though, that consumers are not witnessing the benefits of this economic expansion as wage gains are small. Analysts are sounding the alarm that the good times may not last forever, especially with a trade spat with the US looming and the country still reeling from this past summer’s string of natural disasters.

Meanwhile, Japan is engulfed in a fake news data scandal that is renewing pressure on Abenomics – the economic policies of Prime Minister Shinzo Abe.

According to the Ministry of Internal Affairs, roughly half of the government’s economic statistics are requested for review because 40% of the 56 important economic releases have turned out to either require corrections or be “fake news.” For example, the Ministry of Labor modified its Monthly Labor Survey for the period between 2012 and 2018, conceding that it overstated nominal year-on-year wage hikes by as much as 0.7%.

This is troubling news for the Bank of Japan (BOJ) because it depends on several pieces of economic information to make decisions on monetary policy, including quantitative easing, or QE. In other words, this is a disaster for Governor Haruhiko Kuroda.

The BOJ said in a statement to the press that “we intend to undertake a careful examination based on upcoming results of government studies.” A senior BOJ official revealed that “there is no telling how far the impact has spread.”

This news comes as a new Reuters poll suggests that the odds of Japan sliding into a recession in the next fiscal year have increased in the last three months. While the survey participants think Tokyo will avoid a recession, the overall outlook is concerning with just a 0.8% projected gain.

The USD/JPY currency pair dipped 0.02% to 109.32, from an opening of 109.34, at 15:13 GMT on Tuesday. The EUR/JPY tumbled 0.08% to 124.85, from an opening of 124.93.

If you have any questions, comments, or opinions regarding the Japanese Yen, feel free to post them using the commentary form below.

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