Daily Analysis USDJPY - 16 Aug 2023

Based on the initial Gross Domestic Product (GDP) data for Q2 2023 released on Tuesday, Japan's economy expanded by 1.5% compared to the previous quarter, exceeding the anticipated 0.8% and the earlier 0.7%. Meanwhile, the annualized GDP growth reached 6.0%, surpassing the estimated 3.1% and the prior 2.7%. Japan's Economy Minister, Shigeyuki Goto, projected a gradual economic rebound, while also stressing the need to monitor the risk of a global downturn and rising prices. Goto exhibited a flexible approach to economic and price concerns.

The primary factor contributing to the weakening of the Yen is the monetary policy divergence between the US and Japan. However, the potential belief that US interest rates have peaked could limit the upside potential of the US Dollar. Additionally, traders are adopting a cautious stance due to concerns about possible intervention by the Bank of Japan (BoJ) in the foreign exchange market. It's noteworthy that the BoJ engaged in significant dollar selling in September and October last year, as the Japanese Yen approached the 145 level.

Finance Minister Shunichi Suzuki emphasized on Tuesday that sudden and rapid currency movements are undesirable. He stated that the government is prepared to respond appropriately, but didn't specify any particular intervention levels, according to Reuters.