Japanese production, retail sales fall
Japan’s factory output declined for a second consecutive month as supply disruptions continue to take a toll on manufacturing. Industrial production for January fell 1.3% m/m, worse than the consensus of -0.7%. There was no relief from retail sales for January, which dropped 1.9% m/m, compared to the forecast of -1.2%. COVID health restrictions contributed to the drop in consumer spending.
The weak data will weigh on GDP for the first quarter, which is still expected to show a small gain. Inflation has risen but still remains below the BoJ’s target of 2%, which means that the central bank can be expected to continue its loose monetary stance, at a time when most major central banks are tightening policy.
The crisis in Ukraine could further muddy the outlook for the county’s fragile economy. Oil has pushed above the 100-dollar level and a disruption in Russian oil deliveries to world markets will send oil prices even higher, which will raise prices and dampen consumer spending.
The war in Ukraine continues, although there was a small ray of hope as Russian and Ukrainian officials met yesterday for face-to-face talks for the first time since the Russian invasion. The crisis has shaken the financial markets and the Russian ruble plunged over the weekend in response to tough sanctions from Western countries.
Along with the US dollar, the yen has been an attractive safe-haven asset for panicky investors who have been dumping riskier holdings. USD/JPY has held steady since the crisis began, unlike the other majors which have buckled under the weight of the US dollar as risk appetite has dampened.
USD/JPY Technical
- USD/JPY has support at 114.71. Next, the 100-DMA at 114.37 is providing support
- There is resistance at 116.06 and 116.59
