JPY – The yen weakened after a 7.5-magnitude earthquake struck Japan on Monday

Revised data released by the Japanese government on Monday showed that the Japanese economy contracted faster in the July-September quarter than initially reported. However, economists said this was not enough to shake the central bank's stance. The Cabinet Office's revised GDP data showed that the Japanese economy contracted at an annualized rate of 2.3% in the July-September quarter, the fastest contraction since the third quarter of 2023, worse than the initial estimate of a 1.8% contraction. Economists had forecast an average contraction of 2.0%.

The yen weakened after a powerful 7.5-magnitude earthquake struck northeastern Japan on Monday night, triggering evacuation orders and a tsunami warning, later downgraded to a risk warning. This could potentially prompt the Bank of Japan to postpone its planned interest rate hike next week, depending on the extent of the damage. The Bank of Japan's next monetary policy meeting is scheduled for December 18-19, 2025, with the policy decision and statement expected to be released on the 19th. According to data from the London Stock Exchange Group (LSEG), the market expects a 78% probability of a 25 basis point interest rate hike by the Bank of Japan.

Regarding the USD/JPY exchange rate, the technical chart shows that the pair has initially broken below the upward trend line that began in October. Furthermore, the 5-day moving average has crossed below the 10-day moving average, forming a bearish crossover. It is estimated that the USD/JPY pair still has room for further short-term pullback, with immediate support levels at 155 and 154.30. Based on the Fibonacci retracement levels, the 38.2% and 50% retracement levels are at 153.55 and 152.20, respectively, while the 61.8% level is at 150.85. Key support should also be based on the 150 level. Short-term resistance levels are expected at 156 and 156.80, with the next levels at 158 ​​and 160.

Forecast range:
Resistance 156.00 - 156.80 –158.00* - 160.00**
Support 155.00 - 154.30 - 153.55 – 152.20 – 150.85 – 150.00*

This Week's News Highlights:
8/12 Japanese Finance Minister Satsuki Katayama: Concerned about exchange rate fluctuations

Focus:
Wednesday
Japan December Reuters Tankan Manufacturing and Non-Manufacturing Indices (07:00)
Japan November Corporate Price Index (CGPI) (07:50)

Thursday
Japan Q4 Large Manufacturers' Business Sentiment Index (07:50)

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