Yen Weakens On Japanese GDP Decline; Intervention Speculation Resurfaces

By David Liu,

The yen moved lower against the dollar after preliminary 4 th quarter data showed another shrink in output in Japan. Even though exports were shown to be the weakest performer in the sector, intervention speculation may be dampened as Finance Minister Azumi hints towards “stealth” yen selling.

GMT	$JPY GDP (4Q P)	ACT	EXP	PREV
23:50	GDP Nominal (QoQ)	-0.8%	-0.7%	1.5% (R-)
23:50	GDP Annualized	-2.3%	-1.3%	7.0% (R+)
23:50	GDP (QoQ)	-0.6%	-0.3%	1.7% (R+)
23:50	GDP Deflator (YoY)	-1.6%	-1.7%	-2.1% (R+)

As in previous quarters since early 2011, exports led the decline in total output in the nation, falling 11.9% in the 4 th quarter. Although a breakdown in export data reveals declines in exports to European nations, most likely due to the peripheral debt crisis, many manufacturers are still blaming the record level of the yen as cutting demand from both European and American markets. The continued weakness in these primary sectors dominating the economy may result in increased support for those companies. However, the support could come in the form of lower interest loans as the Noda administration struggles to control excess spending.

- Source: Bloomberg

The yen weakened moderately immediately after the data on speculation of additional Ministry of Finance intervention to support the domestic economy. However, Finance Minister Jun Azumi reported last week that the ministry was moving away from large foreign exchange interventions and towards what he calls “stealth interventions” of small amounts over longer periods of time. At the time of writing, the yen has weakened around 0.159% against the dollar

-Chart generated with FXCM Strategy Trader. Line indicates time of GDP release.

--By David Liu, DailyFX Research

DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/02/13/Yen_Weakens_on_Japanese_GDP_Decline.html

>To order reprints of this article, click here: Reprints