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Japanese Yen Weakens on Machine Tool Orders, Capped by GDP Gain

October 9, 2019 at 15:11 by Andrew Moran

Various Japanese yen notesThe Japanese yen is weakening midweek against multiple major currencies, driven by a slump in September machine tool orders. But this was offset by a jump in gross domestic product. That said, there were other data that drove down the yen on Wednesday, increasing concerns of a full-blown recession, which would come as Tokyo raised the national sales tax.

According to the Japan Machine Tool Builders Association, machine tool orders fell 35.5% in September, an improvement from the 37% decline in August. But it is higher than the market forecast of a 30% drop.

In other data, August household spending rose 2.4%, which was in line with the median estimate. But this might be a signal that consumers did most of their consumption prior to the sales tax hike. The September and October readings might be worrisome for government officials, investors, and analysts.

The major economic indexes are causing consternation nationwide. The Cabinet Office’s Coincident Index and Leading Economic Index both fell to 99.3 and 91.7, respectively. The readings were lower than what investors had expected. Also, the Cabinet released its Eco Watchers Survey; the outlook tumbled from 39.7 in August to 36.9 in September, but the current survey actually climbed from 42.8 in August to 46.7 last month.

These findings have officially changed the government’s stance on the economy to “worsening.”

But the Japan Center for Economic Research reported that real GDP expanded 0.4% in August, buoyed by external demand as imports fell in relative to exports. It should be pointed out, though, that internal demand is still resilient as the number of total openings for every job applicant stood at 1.59 in August, the highest it has been since the 1970s.

The USD/JPY currency pair rose 0.28% to 107.38, from an opening of 107.08, at 15:06 GMT on Wednesday. The EUR/JPY climbed 0.48% to 117.89, from an opening of 117.33.

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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