The USD/JPY advances while Japan’s GDP contracts and the USD remains backed by fears of inflation

• The USD/JPY stabilizes about 146.00 while divergent economic data drives feeling.
• Concerns about inflation in the US support the aggressive fed posture and increase the demand of USD.
• The demand for safe shelter for YEN fades in the midst of Japan’s growth struggles.

The USD/JPY is going up on Friday while operators respond to the weak growth figures in Japan and the increase in inflation expectations in the United States.

At the time of writing, the PAR has risen 0.22% around 146.00, with the approach now changing to the next comments of the US Federal Reserve (Fed) officials on Monday, which could offer clues about the policy of interest rates.

The broader risk feeling has become cautiously positive, with actions stabilizing and treasure yields remaining firm, providing short -term support to the US dollar (USD) compared to Japanese yen (JPY).

The contraction of Japan’s GDP highlights the fragility in economic recovery, presses the path of Boj’s policy

The initial promoter of the USD/JPY movement was the Gross Domestic Product (GDP) report of Japan, which was weaker than expected for the first quarter. The economy contracted 0.2% intertrmetral, compared to the forecasts of a 0.1% drop, and fell 0.7% interannual. This was Japan’s first economic contraction in a year, which generates concerns about the durability of its recovery.

The consumer spending stagnated, exports decreased and a strong increase in imports extended the commercial gap, adding to the winds against the country’s economy.

The data suggests that Japan’s economy remains vulnerable and that the Bank of Japan (BOJ) can be forced to delay any additional increase in interest rates.

The Boj Policy head, Toyoaki Nakamura, gave weight to that opinion on Friday, telling Reuters that “Japan’s economy faces a growing downward pressure” and warning that acting too fast with rates could harm both consumer and business activity.

The feeling of the consumer in the US collapses, but the fears of inflation increase, complicating the perspective of the Fed

At the same time, the markets were shaken by the latest preliminary data from the University of Michigan about the consumer in the United States. While the feeling fell dramatically to 50.8, its second lowest reading in history, short -term inflation expectations unexpectedly increased.

Consumers now expect prices to rise 7.3% during the next year, compared to 6.5% in April, and the highest reading since 1981. This is important because it indicates that households are preparing to continue facing pressures on the cost of living, which could force the Federal Reserve to maintain high interest rates for longer, even if economic trust is decreasing.

Although the Yen often wins during the global risk aversion, the weak GDP data undermines their long -term strength. If Japan’s economic prospects deteriorate even more and inflation goes back, markets can sell the YEN again, especially if the Fed maintains its political position.