As widely expected, Japan's Q3 GDP was downward revised to 0.8% on an annualized basis, vs a 2.0% preliminary estimate, due to slower consumer spending and corporate investment. Also, October machinery orders were lower-than-expected at +2.8%. Analysts forecasted a 6.2% increase in orders, after a 7.4% decline in Sept. Stocks, although ending lower, did not face heavy downward pressure, and both the yen and bond yields were stable. The head of forex at HSBC-Tokyo commented, "The market can't decide if the BOJ will raise rates this month or not by just looking at GDP figures. Today's figure won't have much impact on the yen." Cabinet Office officials maintained their view the economy is in good shape -- one commented there's no indication of a "soft patch." The main focus continues to be the Bank of Japan's quarterly tankan (short-term economic investment survey) due out the 15th. Two BoJ hawks have made the case that weak data, and even a lack of investor consensus over the timing of a follow-on rate hike would not impact a decision to hike rates at the central bank's next meeting on the 19th.
• Sources: Bloomberg [I, II]
• Related commentary: UBS: "We Are Very Bullish on Japan", Data Dependent Japanese Investors Have Eyes On BoJ, Bears Already Hibernating in Asia?
• Potentially impacted stocks and ETFs: Mitsubishi UFJ Financial Group (NYSE:MTU), Mizuho Financial Group (NYSE:MFG). ETFs: iShares MSCI Japan Index (NYSEARCA:EWJ), iShares S&P/TOPIX 150 (NYSEARCA:ITF), BLDRS Asia 50 ADR Index (NASDAQ:ADRA)
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