Japan to extend COVID-19 emergency
Japanese GDP has been revised up and down for 2020 several times. Earlier in July, in the first estimates of the second quarter of 2021, when it was a bit better than expectations, analysts increase their expectations for GDP in 2021 to 2.3% as they could see the rebound in domestic demand.
Later in the second estimate, again data showed a bit more growth than expectations. August 16 numbers for Q2 2021 was 1.3% more than the 0.7% forecast and then on September 8, we saw an increase up to 1.9%, comparing with 1.6% projections. After these data, analysts expand 2021 GDP estimates by 2.6% and 2% in 2022, supported by the strong recovery of the global economy and Japanese government spending, while domestic demand also still increasing.
However, the latest update of COVID-19 was a bit worrying. The Japanese government announced today (Thursday) that they will extend emergency COVID-19 restrictions all across the country until the end of September to curb infections and prevent hospitals from being overwhelmed.
Since this new announcement and restrictions will be more targeted than previous restrictions, so effects will be limited and predictable. Also, we are expecting a bit stronger external demand that can boost exports and investments, both internal and foreign investment.
In response, the Japanese Yen from the second half of yesterday strengthened. Japanese 10-year Government Bond Yields (JGBs) today is a bit down to 0.04%, confirming the short-term risk increasing. This situation was the reason that both government and BoJ officials emphasized that supports will continue. Officials believe that despite the current economic growth, still markets need more help to stay more stable!
From the technical side, as we can see all those upward revisions helped the Japanese 225 to increase to its 6-months high. And after touching a multi-month high, these restrictions, just act as a brake on its bullish trend. For now, as we can see in the bellow chart, side movement is expected there. Side movement with RSI above 60 and increasing OBV trend line still supporting the market bulls, unless if the price breach under the 29,600 to start the bearish trend for the short term.
