Yen Falls as Japan’s GDP Contracts, Denting Prospects of Interest Rate Hike — TradingView News

Key points:

Yen tumbles against dollar Japan’s Q3 growth disappoints December rate hike in question

Asian economy contracted by 2.3% on an annualized basis, complicating the way toward a rate hike.

📉 Yen Slips as GDP Shock Hits

The USDJPY jumped about 50 pips Monday morning, pushing past ¥155.30 after Japan’s economy unexpectedly contracted 2.3% annualized — bad news for growth, troubling news for anyone hoping for a December rate hike. The quarter also shrank 0.6% from the previous one, steeper than initial estimates, confirming Japan’s first contraction in six quarters and complicating the Bank of Japan’s already delicate policy path. Weak data makes it harder for the central bank to justify lifting rates from 0.5% to 0.75% this month, despite recent hawkish hints from Governor Ueda.

🏦 Rate-Hike Odds Take a Hit

Markets had quickly priced in a December rate increase after Ueda said the BoJ would weigh the “pros and cons” of tightening — but today’s GDP miss throws some cold water on that optimism. A weaker yen boosts import costs and inflation, but tightening into a contraction risks choking domestic demand further. The BoJ’s balancing act just got harder. Still, the yen’s weakness remains historically severe as wide US–Japan rate differentials continue to pressure the currency.

🌏 Fed Cut Hopes Offer Limited Relief

Expectations of a Fed rate cut have helped the yen stabilize recently, since narrowing rate gaps typically support the Japanese currency. But even with the dollar softening a bit, Japan’s macro picture remains the bigger driver and today’s GDP print keeps the dollar-yen biased well-bid. Unless domestic data improves, yen strength looks more like a Fed-driven sideshow than a durable trend. Traders are watching December’s meetings on both sides closely.