Japanese Yen Falls on Mixed Leading Economic Indexes, IMF Forecast

The Japanese yen is falling against some of its major currency rivals to kick off the trading week. Key economic indexes drove the yen’s slide, which comes days after disappointing factory activity data. Since the federal government is expected to unleash stimulus measures, can Tokyo turn the ship around and prevent slipping into a recession?

On Monday, the Cabinet Office reported that its Coincident Index came in at 101.1 in September, up from 99.0 in August. The reading, which slightly beat market forecasts of 101.0, is the highest it has been in four months. The index is an important monthly measurement because it consists of a wide range of data, including retail sales, industrial production, and employment.
However, the Leading Economic Index clocked in at 91.9 in September, unchanged from the previous month. This fell short of the median estimate of 92.2 and is the weakest number since November 2009. Analysts pay attention to this index because it serves as a gauge for the economy using all sorts of data, such as consumer sentiment and job offers.
This comes soon after the Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) recorded its seventh straight month of contraction. The PMI edged up to a seasonally adjusted 48.6 in November, up from 48.84 in October. Anything below 50 indicates a contraction. The nation’s manufacturing sector has been hit by slumping factory output, sliding total new orders, and a ballooning backlog of work.
Meanwhile, the International Monetary Fund (IMF) trimmed its gross domestic product (GDP) forecast for Japan for the third time this year. The IMF cut its growth projections from 0.9% to 0.8% for 2019 and slashed its forecast for 2020 to 0.5%. IMF Managing Director Kristalina Georgieva is urging Tokyo to institute fiscal policy measures and structural reforms to prop up growth.

Fiscal policy should be supportive to protect near-term growth and promote inflation momentum. Beyond the short run, a clear commitment to long-term fiscal sustainability is essential.

The USD/JPY currency pair rose 0.22% to 108.86, from an opening of 108.64, at 12:04 GMT on Monday. The EUR/JPY climbed 0.14% to 119.85, from an opening of 119.73.

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