Usdjpy drops amid Japan’s economic contraction and mixed US data

USDJPY Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.71%	-103.8 Pips
Week to-date	0.14%	20.5 Pips
May	1.8%	257.8 Pips

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Fri 12:50 AM JPY GDP (3-mth)

What happened lately

In Japan, the flash estimate of the GDP Deflator rose to 3.3% for Q1 2024 from the previous 2.9% in Q4 2023, suggesting an increase in prices which could indicate inflationary pressures. However, this was accompanied by a significant decline in GDP figures. Japan’s GDP for the 12 months leading up to Q1 2024 dropped to -0.7%, down from a 2.2% increase in Q4 2023. Additionally, the 3-month GDP flash estimate for Q1 2024 also fell from 0.6% to -0.2%. These figures indicate that despite rising prices, economic output is declining, suggesting a contracting economy.

In the United States, the economic data presented a mixed picture. Industrial Production in April 2025 stagnated at 0%, improving from a previous decline of -0.3%, which might indicate stabilization in the sector. However, the U.S. Retail Trade Control Group declined to -0.2% in April 2025, showing weakness in consumer spending. The New York Empire State Manufacturing Index fell further to -9.2 points in May 2025, signaling ongoing challenges in this sector. The U.S. Producer Price Index (PPI) data also showed downward trends, with the PPI excluding Food and Energy decreasing both monthly and annually. The monthly retail trade also saw a significant decline, and initial unemployment claims slightly increased, pointing to mixed labor market conditions.

The recent economic events for both Japan and the U.S. combined to impact the USDJPY currency pair, leading to a drop of -0.71% to 145.59. Japan’s weaker GDP figures and signs of inflationary pressures suggest a challenging economic environment which might prompt further measures from the Bank of Japan (BoJ). Conversely, the U.S. presented a mixed economic landscape with moderate declines in certain sectors and a weak PPI, which could ease inflationary pressures. The potential for divergent economic policies between the two countries might influence further movements in the USDJPY. A close watch on upcoming data releases, such as Japan’s GDP reading, will further shape expectations and directions for this currency pair.

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What can we expect from USDJPY today?

USDJPY on Thursday dropped -0.71% to 145.59. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for USDJPY looks bearish as the pair posted lower in Thursday trading session.

Looking ahead for the day, immediate support level is at 145.08 (S1) with break below could see further selling pressure towards 144.57 (S2). To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 146.75 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 145.41 would indicate selling pressure.

For the week to-date, take note that USDJPY is mixed as compared to prior week.

Key levels to watch out: