Source: ForexYard
Japan’s Economic and Fiscal Policy Minister Kaoru Yosano said that the county’s economy may shrink by as much as 0.8% if economic woes continue at the current pace. According to Yosano, the only way to tackle the recession is by the government introducing a radical economic stimulus injection into the Japanese economy.
The country’s Tankan Survey reported that manufacturers in the world’s second-largest economy fell by their highest amount since 1974. Thus this in effect reveals that Japan is in her first recession since 2001.
One of the reasons for the decline in Japan’s economy is the strong Yen, which is about 25% stronger against the U.S. Dollar since the beginning of 2008. The main sector that has been hit is the manufacturing industry, which is significant as it makes up a large percentage of Japan’s economy. Additionally, Japan’s economy relies on exports of its manufactured goods. Things have deteriorated so much in Japan as of late, Honda, Japan’s major automaker cut it forecasted profits by over 60% this week.
Things are likely to remain volatile as Japan cut its Interest Rates to 0.1% earlier today in response to the U.S. Federal Reserve’s slash in its rates to 0.25%. The JPY is up about 70 pips against the USD since today’s market opened, and currently stands at around the 88.55 level. In the medium-turn, the Japanese rate cut may stabilize the Yen versus the Dollar. However, it is unlikely that the Dollar will make a dramatic recovery, and make gains to the levels it was a year ago.
Looking ahead to 2009, the Yen is likely to remain strong against the USD, and the Dollar may only recover to pre-2009 levels once the U.S. economy recuperates from the recession in the future. Additionally, Japan’s economy is likely to continue its deterioration into the 3rd quarter of 2009.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
