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Japanese Yen Gains Despite Investors Selling Equities Amid Coronavirus

January 30, 2020 at 15:13 by Andrew Moran

Various Japanese yen notes

The Japanese yen is posting modest gains against multiple currency rivals on Thursday as investors appear to be ignoring equities while diving into the traditional safe-haven asset. The Wuhan coronavirus is reportedly worsening with deaths topping 100 and the number confirmed cases exceeding 7,000 in every region of China. Japanese officials are warning that the outbreak could significantly affect the world’s third-largest economy in the near-term, hurting the country’s attempts at stimulating growth.

On Thursday, Chinese health officials confirmed that the death toll has risen to 170 and there are 7,711 confirmed cases. With a confirmed case reaching Tibet, the coronavirus has affected every part of China. What is worse is that the outbreak has spread to at least 15 countries, including the US, Canada, Great Britain, Australia, and the United Arab Emirates.

Japanese Economy Minister Yasutoshi Nishimura warned that corporate profits and factory output might diminish from the coronavirus. Following a Cabinet meeting, Nishimura feared that the longer the coronavirus takes to subside the greater the danger it will affect the Japanese economy since China is the nation’s second-largest export market.

There are concerns over the impact to the global economy from the spread of infection in China, transportation disruptions, cancellation of group tours from China and an extension in the Lunar Holiday.

If the situation takes longer to subside, we’re concerned it could hurt Japanese exports, output and corporate profits via the impact on Chinese consumption and production.

The industries most likely to take a hit? Auto, retail, travel and leisure, and finance. On the financial side, the data is already showing some consternation among investors. Bond investments held by Japanese citizens abroad slumped $5.07 billion in the week ending January 25, while stock investments by foreigners in Japan tumbled $2.61 billion.

The Nikkei index shed more than 400 points and adding to its 4% decline this week.

Analysts are also sounding the alarm that the 2020 Olympics in Tokyo this summer could be damaged. Tourism by China adds to Japan’s gross domestic product (GDP) by an average of 0.2%, and it was expected that the Olympics would substantially lift tourism to the Asian economic powerhouse.

Meanwhile, the federal government announced that it would be revamping its economic data to publish a more up-to-date and accurate GDP reading to reduce the number of revisions. As of April 2022, the government will release business investment data sooner to add it to quarterly GDP numbers.

The USD/JPY currency pair fell 0.09% to 108.92, from an opening of 109.03, at 14:08 GMT on Thursday. The EUR/JPY slipped 0.04% to 119.93, from an opening of 120.02.

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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