Japan's annual household spending weakened, but analysts believe the consumption sector will rebound in the near term. USD/JPY positions are supported by easing Omicron concerns.
On Tuesday (07/December), Japan's Cabinet Office published its annual Household Spending data for October 2021. The data, which measures Japanese household spending, fell 0.6 percent, in line with economists' expectations and slightly better than the previous period's decline of -1.9. percent.
On a monthly basis (Month-over-Month), this data still grew 3.4 percent, but slowed down quite significantly from the 5.0 percent increase in September.
Japan's economic recovery so far is quite late compared to other developed countries. One of the factors is the consumption sector which is developing sluggishly due to concerns over the impact of the Corona virus and high inflation. Rising prices prompted most Japanese consumers to postpone spending their money.
Analysts expect Japan's consumption sector to rebound in the near term as it is driven by a decline in domestic COVID-19 infections. This is expected to dampen the economic impact of the shortage of semi-conductor supply that hit Japan's trade sector. However, the appearance of the Omicron variant still overshadows the prospect of Japanese consumption recovery going forward.
Meanwhile, the wage rate of Japanese workers rose 0.2 percent on an annual basis in October. The figure was unchanged from the previous month's data, but missed expectations for a 0.7 percent increase. In general, Japan's wage trend is still weak and not in line with rising inflation.
Omicron worries ease, USD/JPY less volatile
The US dollar strengthened against the yen at the close of trading earlier in the week after the latest news that people with COVID Omicron only experienced mild symptoms. This makes market sentiment recover so that underlies the strengthening of the Greenback against the safe haven Yen and Swiss Franc. At the time this news was written, the USD/JPY pair was moving steadily at around 113.45.
"The absence of any hazardous Omicron developments in recent days appears to be helping the market stabilize after the high volatility at the end of last week," said Marc Chandler, chief market analyst at Bannockburn Global Forex in a note.
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