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Japan is emerging from a prolonged deflationary period, with February's industrial production rising 2.5% y/y, driven by demand for manufactured goods ahead of new US tariffs. However, uncertainties surrounding US trade policies are impacting global sentiment and expectations for the Bank of Japan's rate hikes, with a forecast suggesting USD/JPY may end the year lower at 145.
Morgan Stanley predicts gold could reach $3,400 an ounce by 2025, driven by increased physical demand from central banks and investors, alongside a potentially favorable macroeconomic environment as interest rates may decline. However, concerns about demand destruction and the need for stabilization in purchasing patterns could limit the rally. Central banks, including the Reserve Bank of India, have shown signs of pausing their gold purchases, which may impact future demand dynamics.
Rabobank's FX analyst Jane Foley indicates that USD/JPY is on a downtrend, with a year-end forecast of 145.00, despite recent corrective activity. The Bank of Japan's upcoming policy meeting is crucial, as any signs of rate hikes could impact the currency pair, while concerns over a slowing US economy and potential tariffs may temper JPY bullishness.
Japan's economy showed stronger growth than previously estimated, with an annualized GDP increase of 1.2% for the three months ending in September, surpassing an initial estimate of 0.9%. This revision comes as the Bank of Japan considers its policy decisions in light of the new data.
Base salaries for regular workers in Japan rose by a record 2.8% in October, marking the largest increase since 1994, according to the labor ministry. This rise in pay signals progress towards a positive economic cycle and fuels speculation of a potential near-term rate hike by the Bank of Japan. Real cash earnings remained stable, avoiding a decline for the first time in three months.
The long-standing belief that a weak yen benefits Japanese stocks is fading as the correlation weakens amid differing global monetary policies. Since a significant drop in summer, the Topix index has remained stagnant, despite the yen fluctuating between a 14-month high and a near 38-year low.
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