We had GDP data from Japan a few minutes ago, preliminary for the second quarter of 2018
(also PPI for July: Japan PPI for July 3.1% y/y (expected 2.9% y/y) )
USD/JPY has dropped since, back under 111 again. If you want an explanation I reckon it lies in the strong economic growth, coming in well above the central estimate, and the details were good also. Argues for less need for BOPJ policy to be kept so loose. Oh, and as an aside … with the state of demographics in Japan (ageing population) this result is even more impressive.
My problem with that explanation lies with the indication of inflation, the deflator which came in at 0.1% y/y, way below the BOJ target. Will the BOJ move towards the 'exit' on such low inflation? Last week's meeting answered that question, no. Sure there was plenty of deckchair-shifting but no move towards easing back on very, very accommodative policy.
But, check out USD/JPY, it seems the first explanation is in the ascendency right now:
