"We see USD-JPY higher on monetary policy divergence, Japan's large trade deficit, Japanese capital outflows and the likely focus in 2014 on the JPY as a major funding currency for carry trades"
- Analysts from Standard Chartered
Following the disappointing GDP figures, more pressure on Shinzo Abe came from manufacturing sector and consumers, as output at Japanese factories slowed, while mood among Japanese consumers improved less than expected.
On Tuesday a government survey showed that large-scale manufacturing expanded at a slower pace in the final quarter, raising questions about Abe's bid to pull the economy out of an entrenched period of deflation and weak growth. Hence, a corresponding index, which is based on the information from companies with a market capitalization of at least 10 million yen, stood at 9.7 for December quarter, easing back from 15.2 in the preceding quarter. While this is well below analysts' forecast for a 17.2 figure, the level is still significantly higher the 0 threshold, which indicates net optimism.
Regarding the survey of the Cabinet Office, it showed that a gauge of consumer confidence gained just 1.3 points in November to reach 42.5, as stock prices improved after a sharp drop recorded in October. Still, the level is below analysts' estimates for a 44.2 reading, and further away from the key 50 level. Meanwhile, despite worrying signs, the Yen retreated from its weakest level since May against the greenback.
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