USD/JPY is trading in the ¥159 range, while a strategist at a major European bank said that improvements in Japan's economic fundamentals could lead to a modest rise in the yen. Japan's real GDP rose 0.3% quarter on quarter in the second quarter and nominal GDP rose 1.2%, suggesting that the economy remains relatively solid.
USD/JPY has since been trading around ¥159.35. Although selling on dollar rallies has continued, the pair fell into the ¥158 range before returning to the ¥159 range. The yen's weakening trend remains firmly entrenched, and cross-yen pairs are rising.
A strategist at a major European bank said that improvements in Japan's economic fundamentals could lead to a modest rise in the yen. Although Japan's real GDP in the second quarter rose 0.3% quarter on quarter, below expectations, nominal GDP rose 1.2%, indicating that price growth across the economy exceeded expectations.
This could sustain pressure on the Bank of Japan to raise rates again in September or October, which would support the yen, according to the strategist.
The strategist also said that concerns over Japan's fiscal position are overblown. Japan's fiscal deficit is among the lowest in the G10, and high nominal growth could boost tax revenues and improve the fiscal position, according to the view presented.