Japanese Business Confidence Hits 4 Year Low
A sharp deterioration in Japanese Business Confidence drove the Japanese Yen to a 2.5 week low against the US dollar.
The triple blow of slowing US growth, rising oil prices and a strong Yen forced businesses to become even more cautious about the outlook for the Japanese economy. Goldman Sachs argues that this pace is equal to the pace that was seen in the past recession. Although growth is deteriorating, there is still a next to zero chance of a rate cut from the Bank of Japan. Interest rates are already at 0.5 percent and the BoJ does not have significant room to ease monetary policy. Looking ahead, we expect the BoJ to become even more pessimistic about the outlook for growth, but as usual that may only have a limited impact on the Japanese Yen as risk appetite remains the currency’s dominant driver.