Markets have a way of switching gears almost overnight and that is what seems to be happening in Asia. Financial news out of China seems to be going from bad to worse forcing investors to turn their focus elsewhere.
Enter Japan. While Japan has always been on the sidelines, with China out of the picture, things are gaining ground in the world’s third largest economy albeit slowly and cautiously.
Japanese government data showed on Wednesday that retail sales rose an annual 0.9 percent in June, surpassing the expected 0.5 percent rise but slowing somewhat from the previous month. June came in as the second consecutive month of weakening demand after rising 3 percent on the year in May following a 5 percent gain in April.
According to Marcel Thieliant, Japan economist at Capital Economics, "The renewed drop in retail sales in June adds to the evidence that consumer spending fell last quarter."
USD/JPY Reverses
The stronger than expected retail sales caused the USD/JPY to reverse previous gains, falling into negative territory in the mid-Asian session while the dollar edged lower on profit-taking. The pair traded 0.16% lower to end the last session at 123.36.
The benchmark Nikkei stock index opened down 0.1 percent following the data, but retail stocks rallied in early trade,
Declining oil prices may be attributed to a lower 2015 estimate for consumer growth and officials are now predicting only a 0.6 per cent rise, backing away from the previous 1.4 estimate. Japan is one of the largest net importers of crude oil and lower prices translate into a decrease in energy consumption which leads to a slower rise in consumer prices.