Japanese GDP data slightly positive – but far too early to sound the all clear

For the first time since the VAT rise in April 2014 Japanese growth data surprised on the upside last night. With growth rates of +0.6% compared with the (actually very weak) final quarter of 2014 the Japanese economy is moving in the right direction. 

USD-JPY nonetheless continues to test the resistance at 121. The data was not so overwhelming as to convince the market that a further easing of monetary policy on the part of the Bank of Japan (BoJ) was off the agenda. The result for the GDP deflator, an alternative measure for price increases, disappointed after all. 

"During the course of the year the BoJ will have to face the fact that its current monetary policy is not having a proper effect on the real economy. But it is likely to take some more time before coming up with creative ideas. Analysts do not expect to see renewed easing at the BoJ meeting on Friday. USD-JPY is likely to feel comfortable in the area around 120 for the time being", according to Commerzbank.