The Japanese yen is steady on Friday, after gaining 2% over the past three days. In the European session, is trading at 145.52, down 0.09% on the day.
Japan’s Economy Shrinks for First Time in a Year
Japan’s GDP report was a major disappointment, as the economy contracted for the first time in a year. The economy declined by 0.7% in the first quarter, a sharp reversal from the upwardly revised 2.4% gain in Q4 2024. This was below the -0.2% market estimate. Quarterly, declined 0.2%, down from 0.6% in the fourth quarter and weaker than the market estimate of -0.1%.
The weak GDP report preceded the US tariffs which took effect in April. The tariffs will be felt in the second quarter and will likely dampen growth. Japan’s export sector is under pressure due to escalating trade tensions and domestic consumption has been weak. This had led to calls from some lawmakers to increase fiscal spending to cushion the expected blow from the the tariffs.
The Bank of Japan can’t be pleased with the soft GDP numbers. The Bank is looking for stronger consumption and higher wage growth before it raises interest rates. The uncertainty over Trump’s trade policy has forced the BoJ into a wait-and-see stance, hoping that US tariff policy will become more clear in the following months.
The US releases UoM consumer sentiment and for May later today. Consumer sentiment is expected to improve to 53.4 from an upwardly revised 52.2. surged in April to 6.5% from 4.7% and are projected to rise to 6.6%, as consumers remain anxious about inflation.
USD/JPY Technical
- USD/JPY is testing support at 145.51. Below, there is support at 145.22
- 145.72 and 146.01 are the next resistance lines
