USD/JPY Forecast: The pair will probably stop further gains

The Japanese government revised its expectations for economic growth this fiscal year on Tuesday, as solid exports and consumer spending aided by progress in vaccinations will return the economy to pre-pandemic levels by the end of the year. The government now predicts that during the fiscal year, by the end of March, the economy will expand by 3.7% and that at some point, the real gross domestic product will exceed  4.9 trillion dollars marked in the last quarter of 2019.

Japan’s recovery will be mild in the first half of this fiscal year but is expected to accelerate in the second half due to a steady increase in exports and increased capital spending. Growth in the next fiscal year is expected to slow to 2.2% as the pace of exports slows.

Bloomberg announced the research details early Wednesday morning, suggesting that Japanese Prime Minister Yoshihide Suga will probably present another package of economic incentives worth at least 180 billion dollars in the next few months. According to Bloomberg, the average forecast of 18 surveyed economists indicates a package between 20 trillion yen and 30 trillion yen ahead of the national elections that must be held by the beginning of autumn.

It is believed that the Japanese economy in the last quarter barely emphasized the growth due to stopping and stopping and limiting the occurrence of the epidemic. But as vaccine efforts in the country are now accelerating, the government is focusing its new spending on post-Covid growth measures rather than a bigger fight against the virus. The new spending would follow three additional budgets already drawn up during the pandemic, which added about 70 trillion yen to Japan’s debt pile.

Concerns about the spread of the highly contagious Delta version of the coronavirus continued to apply to investor sentiment. This was evident from the prevailing cautious mood in the stock markets, supporting the Japanese yen in a safe haven. This, together with reduced demand in US dollars, could further work together to limit the USD / JPY pair upwards.