The Japanese Yen (JPY) was unimpressed by this morning's slightly better than expected GDP growth figures for the second quarter. There are likely several reasons for this. First, the Japanese GDP time series is quite volatile, so any single data point should always be taken with a grain of salt. In addition, the previous quarter was revised down slightly, which basically halves the upside surprise, Commerzbank’s FX Analyst Volkmar Baur notes.

USD/JPY seems to be quite comfortable at around 147

“On the positive side, private consumption was much better than expected. And the previous quarter was also revised slightly higher. This is particularly important for the JPY, as private demand is expected to ultimately drive inflation in Japan going forward. However, it should also be noted that private consumption has still not returned to the level of 1Q2023 and is still also below the level of 3Q2019, i.e. before the pandemic.”

“All of this however was overshadowed by reports that BoJ Governor Ueda was invited by the Diet to justify market movements following the rate hike. The governor is likely to strike a dovish tone again to reassure the parliamentarians, which is why I think it is unlikely that the BoJ will raise rates again in the very near future.”

“For now, USD/JPY seems to be quite comfortable at around 147. However, it may not take much to push it out of this fragile equilibrium.”