Morning Forex Fundamental: JPY

Morning Forex Fundamental: JPY

'If you look at the July-September figure, (machinery orders) area rising gradually. Especially for manufacturers, there is uncertainty about demand overseas, and so they are still relatively hesitant.' - Mitsubishi UFJ Morgan Stanley Securities strategist Shuji Tonouchi

Recent data and announcements from the world's third largest economy are adding more pressure on the policy makers, as the economy expanded less than expected, while core machinery orders slide in June, as companies are less willing to invest in Japanese business. Even despite stronger domestic demand, core machinery orders, which exclude volatile orders, rose only 2.7% in June, from the month before, when they shot up 10.5%, data from the Cabinet Office showed. Even despite weak figures, it was a better-than-expected reading, as analysts predicted a 7.1% slump in the number of orders. Nevertheless, machine orders have already recovered pre-financial crisis levels, as domestic companies are planning to invest more soon, a trend that may provide some support to a contentious plan to raise the sales tax.

Minutes from the BoJ's latest policy meeting revealed a downgrade of the GDP growth forecast, as overseas economies are picking up slowly and the Japanese economy slowed down. Currently, the Bank of Japan expects its economic output to rise 1.8% this year, from previously expected 1.9%, and mentioned the economy should slow down in the next year, expanding 1.3%, down from previous estimate of 1.4% annual growth. Kuroda also downgraded its inflation projections by 0.1%, saying consumer prices would rise 0.6% this year and accelerate to 3.3% in the next one.