BOJ sighs relief as growth recovers

Bank of Japan (BOJ) policymakers are feeling much relieved as data last night revealed that growth bounced back sharply in the first quarter in world's third largest economy.

• Preliminary estimate showed that Japan grew 0.6% q/q in the first quarter making annualized growth rate at 2.4%. Economy grew 3.4% in the first quarter from a year ago.

In recent times Bank of Japan (BOJ) has been facing harsh criticism over its massive qualitative and quantitative easing (QQE) program over its failure to boost growth and inflation so far.

Components of GDP -

• Private consumption grew by 1.4% and consumption of households by 1.5%. Private residential investments grew by solid 7.5% and non-residential at 1.4%. All rates are annualized.
  
• Public sector remained weak, with public demand growing by 0.4% and investment dropping at -5.5%.
  
• Exports grew at 9.9% annualized rate while imports grew faster at 12%, thus dragging down net export.

Stronger GDP has boosted Nikkei which is currently trading at 20185, up 0.8% today. However stronger numbers have failed to strengthen Yen.

Why Yen is weak?

• GDP number is strong, however both inflation and growth is not strong enough for markets to consider winding up of Japan's massive monetary easing. Moreover stronger Dollar this week have pushed Yen further down.

Yen is currently trading at 120.9 and has broken its range of 118.5-120.5. Next range high is around 122 area.