Japan’s economy continues to decline as the Yen goes from strength to strength, and global the global recession deepens. The International Monetary Fund (IMF) forecasted that Japan’s GDP will decline by 2.6% this year, just behind Britain’s forecasted -2.8%.
The report was published yesterday, sending shock waves across the Atlantic, and to the Far Eastern markets. Japan’s economy is expected to be hurt as long as the global recession lasts. What will eventually help Japan’s economy recover our carry trades, in which people borrow Yen and buy higher yielding currencies. This will happen when the developed countries put up their Interest Rates when their economies start growing again.
Against the Dollar, the JPY has climbed over 23% in the past year, and currently stands at 89.35. The Yen has also risen dramatically against other major currencies, such as the Pound, Dollar, and EUR. The global economic recession and strengthening Japanese Yen has severely hurt Japan’s exports. For example, Japan’s 2 largest car makers, Honda and Toyota have been significantly hit by the turn of events. This is seen especially in the U.S., which is Japan’s largest trading partner. This is important, because in recent years Japan’s car industry has gained a big foothold in the U.S. Analysts thus foresee a dim future for Japan’s economy.
The country’s unemployment rate is currently 4.4%, up from the previous 3.9%. Japan’s Labor ministry predicts that the economy will lose an additional 125,000 jobs by March 31. However, many analysts foresee a grimmer figure, as they predict a far higher figure of 400,000. Adding to negative data, Japan’s output tumbled by a staggering 11.9% in the 4th quarter of 2009. Companies plan to cut production further in the coming months, as demand from the U.S., the Euro-Zone, Britain, and China is set to fall further.
Analysts predict that as long a the Yen is bullish, and the developed economies led by the U.S. fail o show some improvement, then Japan’s economy is likely to show dismal results. However, if the Obama stimuli lead to a quicker-than-expected global recovery, then the Yen may start to fall, and Japan’s economy may start to recover too. Forex traders are advised that whenever the U.S. and other Western countries show a string of good economic figures, then the Yen is likely to lose some of its value. This is so, because as investments seem lees risky, people pull their money out of the safe-haven Yen. To learn more about the global economy and to start trading on the forex market, please visit ForexYard.
