Japan's economy is showing signs of slowing down.

The yen has slightly depreciated due to the slowdown in Japan’s economic activity, while the Bank of Japan (BoJ) is expected to continue raising interest rates. Private sector activity has contracted for the first time in five months. However, it is anticipated that the central bank will raise interest rates this year amid persistently rising inflationary pressures. Additionally, the yen faces further pressure from the deadline for President Trump’s tariff imposition on April 2, which has directly impacted investor confidence.

Japan’s trade balance increased to 58 billion yen in February, recovering from a 41 billion yen deficit in the same month the previous year. This increase was driven by a sharp rise in exports, while imports declined slightly by 0.7% year-on-year. The main pressure came from a sharp 11.1% contraction in mineral fuel imports, including petroleum and LNG. Additionally, imports of metal ores used in production declined. On the other hand, purchases of electrical equipment increased by 6.5%, driven by semiconductor demand, while machinery imports surged by 21.5%. The United States remained Japan’s largest source of imports.

Japan’s exports grew by 11.4% year-on-year, reaching a total value of over 91 trillion yen. However, this fell short of the market’s expected 12.1% growth. The majority of exports continued to be in the automotive sector, with vehicle exports rising by 12.2%. Additionally, sales of other equipment increased by 19.9%. Machinery exports expanded by 11.6%, particularly electrical machinery, driven by semiconductor demand. Exports to Taiwan surged by 36.5%, while exports to China grew by 14.1%.

The Bank of Japan (BoJ) maintained its interest rate at 0.5% in its March meeting, aligning with market expectations after its third rate hike in January. The committee remains cautious, closely monitoring global economic risks that could impact Japan’s recovery. The BoJ highlighted uncertainties regarding the country’s economic outlook amid rising U.S. tariffs. Japan’s economy has only recovered slightly due to cost pressures. However, wage increases have continued as companies benefit from a weaker yen. The central bank has projected that inflation will rise slightly in 2025.

Japan’s manufacturing PMI fell to 48.3 in March, below the market’s forecast of 49.2. This marks the ninth consecutive month of contraction and the sharpest decline in a year. Companies have scaled down production in response to a rapid decline in new orders, although overseas sales showed slight growth after contracting in previous months. This production cut has also led to significant reductions in purchasing and continued inventory drawdowns. Meanwhile, employment has increased for the fourth consecutive month, while production costs have risen for the seventh straight month, though at a slower pace.

The services PMI dropped to 49.5 in March from 53.7 in February, indicating the first contraction in the services sector and the sharpest decline in nine months. New orders and foreign sales declined slightly, in line with a slowdown in employment. Meanwhile, cost pressures surged rapidly, with input costs rising at the highest rate in 25 months, forcing producers to pass some of the costs on to consumer prices.

Techical analysis data (5H)

Resistance: 148.38, 148.6, 149

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 147.36 - 147.76 but cannot break the support at 147.76, you may set a TP at approximately 148.6 and SL at around 147.14 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 148.38 - 148.6, you may set a TP at approximately 149 and SL at around 147.36 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 148.38 - 148.6 but cannot break the resistance at 148.38, you may set a TP at approximately 147.36 and SL at around 149 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 147.36 - 147.76, you may set a TP at approximately 147.14 and SL at around 148.6 or according to your acceptable risk.

Pivot point March 24, 2025 09:10 PM. GMT+7