The East Asian superpower is the major export market for both Australia and New Zealand, and weakening there can reverberate throughout the trade path, which is disconcerting.
During the last month, industrial production increased 3.8% annually, falling short of forecasts for a 4.6% increase. In that same timeframe, retail sales increased by 2.7% rather than the anticipated 5%. At 5.7%, capital investment growth was at its worst level since last year in November. Prior to the report, economists had projected a growth of 6.1%.
The Japanese Yen increased on Monday, notwithstanding disappointing Q2 GDP figures. Production increased at a 2.2% annual rate, below the base projection of 2.5%. The currency might have been created as a result of an unanticipated increase in the GDP deflator, an inflation gauge.
The measure revealed a -0.4% YoY decline in prices, the weakest deflation from the 2021 Q1. The deflator was anticipated to decline by -0.8%, following a decline of -0.5% in Q1. That might have given rise to rumors that the Bank of Japan might eventually become more hawkish.
The implied three-year policy trajectory for the Bank of Japan (BoJ) has not changed from the previous week’s pricing in the rates markets. The baseline lending rate is not anticipated to exit negative territory until at least the 2023 Q2.
Nonetheless, the Yen kept climbing thanks to new support from China’s dismal statistics release. Particularly in the G10 FX sector, turmoil in one of the biggest economies contemporarily looked to have sparked a larger risk-off sentiment. The Japanese yen increased along with the guarded greenback.
The markets in the Asia-Pacific region were able to shrug off the bad news, moving up 0.6 % in the second session of the day. The opening of European stocks is likewise predicted to be positive. The flagship S&P 500 index futures are moving downward, but this is a cautionary sign that equities’ recovery may only be temporary.
