Japan's GDP data for the fourth quarter of 2024 was released today, and it showed strong growth. On a yearly basis, GDP increased to 2.8% from the previous level of 1.7%. On a monthly basis, GDP rose to 0.7% from the previous level of 0.4%. All related GDP estimates also grew. Thus, the share of capital expenditures in the GDP structure increased to 0.5% from the previous level of -0.1%. The productive capacity index grew by 1.7%. Along with the rise in GDP indicators, the PMI in the services sector also showed significantly optimistic growth. It increased straight to 7.10 from the previous level of -1.2.
GDP growth provides the Bank of Japan with additional arguments for more confident monetary tightening measures. The last interest rate increase took place on January 24. The rate was raised from 0.25% to 0.5%.
The current GDP growth is paving the way for the next tightening. Another factor contributing to it is the consistent rise in inflationary pressures in the Japanese economy. Thus, Tokyo’s core consumer price index (year-on-year) has been rising since October 2024. It was 1.8% in October, 2.2% in November, 2.4% in December, and 2.5% in January. If the tendency continues, there will be another argument in favor of raising rates.
From the technical point of view, the USDJPY currency pair is reaching the resistance level of 151.200. This level is most likely to be the nearest target for USDJPY.
The overall recommendation is to sell USDJPY.
Profits should be taken at the level of 151.20. A Stop loss could be set at the level of 152.30.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
