JPY Will Jitter at Low Level Due to Pandemic

Japans economy is facing new risks due to the spreading new coronavirus. The yen may drop towards a relatively low range between 110 and 115, threatening to weaken its status as a safe haven.

Bank of Japan‘s board pointed out that shrinking confidence of automotive and retail businesses could affect outlook of capital expenditure, while exports are unlikely to see significant rally. The outbreak may dampen private sector consumption in Japan and further harm household confidence if the situation doesn’t improve. BOJ professionals noted that strengthening the promise of monetary policy easing is among the few effective ways to boost inflation prospect.

Due to the impact of typhoon and consumer tax hike, Japan‘s GDP in Q4 shrank an annualized 6.3% and could face the first technical recession since the third quarter of 2012. It is estimated that Japan’s growth may come to a standstill after the summer Olympic in Tokyo.