USD/JPY Monthly Fundamental Forecast January 2016

Outlook and Recommendation

The USD/JPY closed out 2015 at 120.23 as the Bank of Japan held fire again this month. The pair has been slowly easing off highs this year above the 1.25 level. The pair was flat on an annual basis.  Japan fell once again in a technical recession during the third quarter of 2015. Only a few weeks later it is clear that the first preliminary data sent out a false signal. As it happened so often with Japan’s national account data, the second official estimate contained substantial revisions to third quarter GDP data. Even the prefix changed:

Instead of contracting by -0.2%, GDP is now reported to have grown by 0.3% in the three months until September. The latest data are more consistent with our own observation of improving sentiment indicators in the business sector as well as among private households. This trend continued into the final quarter of 2015: In November, Japan’s manufacturing sector purchasing managers index climbed to its highest level since March 2014. Small business sentiment recovered from a temporary dip through the second quarter. The Shoko Chukin Bank’s sentiment indicator climbed to 49.9. Any reading above 50 suggests that a majority of firms participating in the poll express a positive assessment of their current situation.

The last time this indicator stood above 50 points was during the first quarter 2014. Consumer confidence as well improved further until November, reaching its highest level since December 2013.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events Scheduled In January