- Izumi Devalier, a Japan economist at HSBC Holdings Plc
This week starts with positive news from Japan, where first quarter's growth was revised to the upside, as capital spending soared more than it was initially expected. Following the data, USD/JPY fell to 102.37, however, keeping in mind strong support at 102.22 and ‘buy' signals, from aggregate technical indicators, the depreciation is likely to be short-lived.
The Cabinet Office reported the world's third largest economy accelerated at an annualized pace of 6.7% in the January-to-March period, faster than the previous estimate of 5.9% and surprising markets to the upside, who expected no change. On a quarterly basis, the economic output climbed 1.6%, which was slightly stronger than the preliminary reading of 1.5%. The main cause for the improved reading came from business investment, which accelerated from 4.9% to 7.6% on a quarterly basis. Overall though, the boost came mostly due to the increase in consumers' and companies' spending ahead of the April 1 consumption tax hike.
Despite the improvement, many economists believe there will be a subsequent decline in domestic demand following the tax hike. At the same time, they are betting the consumption will return to normal levels in the third quarter. Private consumption accounts for around 60% of the world's third largest economy.
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