Home Forex News USD/JPY Looking For Direction Japan’s Economy Plunges Into Recession

USD/JPY Looking For Direction Japan’s Economy Plunges Into Recession

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  • Japan In Recession
  • Exports Import Contraction
  • U.S Economy recovery hopes

USD/JPY is struggling for direction at three-week lows as the Yen remains under pressure on Japan’s economy, plunging into recession. Japan’s economy has contracted for two consecutive quarters at the backdrop of the COVID-19 pandemic shock.

Japan Economy Contraction

The Yen has continued to weaken against the U.S dollar, which has remained resilient as a safe-haven amidst fears of the global economic recession. Amidst the weakness, the exchange rate appears to have found support above the ¥107.00 level, having struggled to break through the ¥107.50 resistance level.

The rate at which Japan’s export continue to plunge raises serious concerns about what the future holds. Exports in May plunged by 28.3% versus 17.9% expected. The dive marked the 18th consecutive month of decline and the steepest since the financial crisis in 2009. Imports have also been on the decline contracting by 26.2% against 12.9% expected.

Japan’s export and import orders have fallen by about 70% due to economic stagnation around the world in the aftermath of the COVID-19 pandemic. Exports to the U.S are down by more than 50%, and those to Australia are down by about 59%.

USD/JPY Outlook

USD/JPY looks set to continue edging higher as the greenback continues to strengthen across the board on optimism about U.S economy recovery. The Federal Reserve has implemented a number of monetary policies that appear to be bearing fruits. Unemployment levels have improved from record levels.

A record spike of 17.7% in retail sales is the latest development affirming the thought that the U.S economy is on a recovery path. However, FED chair remaining dovish about economic recovery should continue to weigh on the U.S. Dollar sentiments against other major currencies as well as the Yen.

Looking ahead, the focus will be on the U.S House Starts and Building Permits that should help shed more light on the U.S economy. The focus will also be on ongoing FED chair testimony, which has so far painted a gloomy outlook about the U.S economy.

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