JPY is in the spotlight once again. Overview for 15.02.2024

The Japanese yen, paired with the US dollar, remains weak. The current USDJPY exchange rate stands at 150.14.

While JPY quotes have marginally rebounded from their lows, their performance is far from impressive. Market attention is heavily focused on the state of the Japanese economy, with today’s statistics confirming the economy's downturn into recession.

The country’s GDP in Q4 2023 declined by 0.4% y/y, following a 3.3% drop in the previous quarter. The primary forecast had implied a 1.4% y/y increase. Weak domestic demand and subdued capital expenditure are detrimental to the economy. Without activity from these pivotal drivers, the economy will fail to enter positive territory.

A recession is typically confirmed when GDP declines for two consecutive quarters, which is the case here.

There is a prevailing belief that the recession will intensify at the end of Q1 2024, which is negative news for the JPY. Under such circumstances, the Bank of Japan is unlikely to decide to tighten monetary mechanisms.