The economic landscape is evolving as the Trump administration's policies begin to take shape. In Japan, domestic demand has shown positive trends over the past three and a third quarters. However, personal consumption experienced negative growth, attributed to reduced disaster-related storage needs and a decline in beverage demand. Meanwhile, the USD/JPY has been falling toward 151.50, losing 0.39% on the day.
Japanese Q4 Gross Domestic Product (GDP) data revealed stronger-than-expected results, with an economy expanding 0.7% quarter-on-quarter (QoQ) and 2.8% year-on-year (YoY). This growth was underpinned by robust exports, particularly in services, which helped counterbalance the decline in domestic demand. For the first time, the year's value rose by 2.9% year-on-year, surpassing 609.3 trillion yen.
"Japan faces significant challenges if its companies become targets amid US President Donald Trump's policies; the government will respond carefully to potential impacts." – Yoshimasa Hayashi, Japanese Chief Cabinet Secretary
The international economic scene remains dynamic, with all eyes on Tuesday's Reserve Bank of Australia (RBA) interest rate decision. In the Asian session on Monday, the AUD/USD regained momentum and climbed above 0.6350. The sustained weakness of the US Dollar, coupled with the prospects of a Russia-US meeting, outweighed dovish RBA expectations, influencing currency markets.
Gold prices also found demand, reverting toward $2,900 in the Asian session on Monday. This movement was supported by easing global trade war fears and optimism for an end to the Russia-Ukraine conflict amid Tuesday's anticipated meeting between the US and Russia. Such developments have lifted risk sentiment and bolstered Gold prices.
President Trump's announcement of new tariffs on some of America's trading partners adds another layer of complexity to the global economic environment. These tariffs have raised concerns about potential ramifications for Japan's economy and its companies.
Chief Cabinet Secretary Yoshimasa Hayashi emphasized that Japan's economy expanded by 0.7% QoQ and 2.8% YoY in Q4, exceeding market expectations. He acknowledged the significant challenges Japan faces if its companies become targets under President Trump's policies and assured that the government will respond carefully to mitigate potential impacts.