The Japanese yen was slightly lower through overnight trade as gross domestic product for the second quarter showed less than exemplary results. Following a first quarter revised 3.2 percent rate of growth, the second quarter GDP assessment was far below at a 0.5 percent expansion.
Being the last main economic indicator before policy makers meet to decide on interest rates on August 22-23, the figure lends to a greater likelihood of a stay on rates. This is in stark contrast to the previously overriding sentiment in the market which previously expected an imminent hike of 25 basis points from policy makers. Now, it seems that speculation has shifted, and will likely weigh on the Japanese yen in the near term, especially against carry candidates. Forecasts are pitting a 33 percent likelihood of a rate hike versus 75 percent earlier in the month. Going forward, policy makers will still likely remain pat on inflationary prevention as long as consumer spending remains timid as it has for the past year. Domestic spending continues to remain low as consumer confidence is being dampened by rising taxes and low wages, even as the unemployment rate dropped to a nine year low.