PMI reports for the month of April continue to expose that in spite of heavy quantitative easing dosage from Bank of Japan (BOJ), recovery in World’s third largest economy remains fragile.
- Manufacturing sector production contracted for first time since July last year as growth in new export orders reached weakest level in at least 10 months.
- Overall PMI for April stands at 49.9 in contractionary zone.
- Moreover domestic demand remains fragile.
- Bank of Japan officials expressed worries over consumer purchasing pattern, reducing consumption with price rise.
- It is not an easy task to bring consumers back to inflationary environment after decades of deflation.
- Today Services PMI was released. PMI for April moved to expansionary zone, however remains weak, headline reading was 51.3.
- Services index expanded in April, however contracted in previous two months.
Japan is very much depended on Fossil fuel and foreign imports of such. Japan despite being third largest economy is ah 2011 Tsunami ravishing the nuclear power generation industry with Fukushima Daichi disaster.
Japan’s economy faces heavy price risk as global prices of crude oil and natural gas are going up. Weak yen would exacerbate the cost further.
As a net effect, there would no increase in pace of Japan’s asset purchase program any time soon.
The material has been provided by InstaForex Company – www.instaforex.com