Reports out of Asia this morning indicated that Japan’s economy grew 0.3 percent in the second quarter of 2012, a number which, although positive, fell quite short of the 0.6 percent that analysts had expected. Japan’s GDP gained 1.3 percent from January through March. The report came on the eve of the country’s O-bon holiday, a weeklong festival that begins tonight in Japan, and on the heels of other distressing news from the region, including reports that Chinese trade had decreased and that investors remain concerned about the European debt crisis.
Analysts predict that Japan will see further decreased demand in the current fiscal quarter as Europe continues to scale back its demand, a measure that directly affects Japanese exports. Should the situation continue to be problematic, the Bank of Japan may feel pressured to take action as early as next month if the downturn continues, especially if a monetary easing policy is implemented by the US Federal Reserve. Despite this morning’s dismal report, the Japanese economy is expected to outperform that of its largest peers, largely because of the consistent domestic demand. Still, the continued strength of the yen may continue to cause problems for the export market, something both investors and the Bank of Japan will have to monitor closely in the coming weeks.
During Monday’s Asian session the greenback traded higher against most major currencies, and it was up 0.04 percent against the euro, to 1.2295. The US dollar also posted 0.01 percent gains against the yen, hitting 78.27.