- Marcel Thieliant, the economist
Japanese growth slowed to 0.7% in the final quarter, missing analysts' expectations for a 0.9% and slowing from third quarter's solid growth of 1%. Moreover, on a quarterly basis, growth disappointed as well, coming at 0.2% instead of 0.3% expected. The main downside pressure came from non-residential investment, that advanced only 0.8% rather than the preliminary projections of 1.3%. The growth now stands at the lowest point since Prime Shinzo Abe took office in December 2012 pledging to revive growth in the world's third largest economy.
At the same time, the trade gap rocketed 71% to 2.79 trillion yen in January, mostly due to weak exports numbers, which was affected by global turmoil in emerging markets, while weakening Yen failed to boost exporters' profits. Imports, however, surged 30% from a year ago, hitting 7.8 trillion, outpacing a 17% increase in the value of shipments. A weaker Yen so far has raised the costs of the nation's imports, as Japan's is becoming more reliant on imported fuel.
Investors reacted quickly, with Nikkei 225 index falling by 95 points, or more than 0.6%, while the Japanese Yen was little changed, with the USD/JPY pair still trading just slightly above 103 level. The latest data, however, is bolstering the case the central bank will have to announce fresh stimulus soon ahead of the upcoming tax hike in April.
© Dukascopy Bank SA