EBC Markets Briefing | Yen strengthens despite unfavourable GDP data

The Japanese yen grew stronger on Monday, shrugging off negative economic data. GDP expanded 1.1% in Q2 on an annualized basis, missing expectations for 2% growth as softer domestic demand offset strong exports.

PM Takaichi promised to stop cutting budgets and instead spend more money at home on future tech. She wants the government to invest heavily in semiconductors and quantum technology to help the country grow.

Most Japanese companies are barely using AI yet. A Reuters survey found that over 80% use AI very little or not at all, which could slow down the country's plans to improve productivity.

The country already suffers from the lowest productivity among the G7 nations. That will severely bottleneck economic growth by failing to fix its biggest crisis: a massive labour shortage.

Japan's population fell by over three million people between 2020 and 2025, marking the sharpest five-year decline since record-keeping began in 1920 – a driver of sticky core inflation.

It has been also grappling with higher energy prices that have also led to steeper overall imported inflation for businesses, with higher dollar payments further pressuring the yen.

EBC Financial Group analyst says that the yen was trapped in a tight squeeze, a decisive breakout above the recent August lows or a jump above the200 SMA will likely dictate the next major trend.

Asset Recap

As of market close on 14 August, among EBC major products, AMD shares led gains on earnings beat. The data centre business achieved record-breaking results, with revenue more than doubling year-over-year.

Broadcom plunged as a new estimate put an enormous number on the debt machine behind the chipmaker's AI expansion. But prediction market traders are betting Broadcom's AI business will deliver another huge quarter.

Oil prices rose after the US said its naval blockade of Iranian ports could continue "indefinitely," reigniting concerns over energy flows through the critical Strait of Hormuz.

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