Q3 Economy Shrinks Less than Expected

• Japan experienced a smaller Q3 decline than previously anticipated.
• Japan’s economy shrank due to global recession risks, China’s faltering economy, and a weak yen.
• Japan’s current account deficit increased to 609.3 billion yen in October.

Today’s USD/JPY forecast is slightly bearish. The third-largest economy in the world, Japan, experienced a smaller third-quarter decline than previously anticipated, supporting the idea that it is slowly emerging from COVID-19 gloom even as key export markets continue to deteriorate.

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Separate figures reveal that October saw the country’s first current account deficit in eight years due to increased import costs brought on by this year’s collapse in the yen to multi-decade lows and the consequent impact on consumers and companies.

Japan’s economy unexpectedly contracted in the third quarter as rising import costs and prospects of a global recession affected consumer spending and company activity.

According to some observers, the economy may strengthen in the current quarter due to the relaxation of supply limits on semiconductors and vehicles and the removal of COVID-19 border controls, increasing tourism.

Others, on the other hand, expect the world economy to enter a recession in 2023, which would be devastating for Japan and other trade-dependent Asian exporters.

A weak yen and high import costs raise living expenses, offsetting factors contributing to GDP growth.

According to the Ministry of Finance figures, rising energy and other import expenses caused Japan’s current account deficit to increase to 609.3 billion yen ($4.45 billion) in October. The shortfall was the first since March 2014.

USD/JPY key events today

Investors will pay attention to the initial jobless claims report from the United States that will shed more light on the labor market.

USD/JPY technical forecast: 30-SMA support on the test

Looking at the chart, we see the price slightly above the 30-SMA, which was recently broken, and the RSI slightly above 50. These indicators point to a bullish move. The price broke above the 136.05 resistance level, and the SMA was on strong bullish momentum.

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The price has pulled back to retest the 30-SMA and looks ready to bounce higher. However, bulls still need to show more strength for a new high. When they do, the price will likely take out 138.03. If they fail, it might break below the SMA and retest the 134.03 support.

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