Release Explanation: This release is a broad gauge of inflationary pressures seen in the Japanese economy. Also called the GDP deflator, if differs from the CPI in that it does not take into account the changes in the price of imports and also tends to underestimate price changes. This release is also rather untimely as it is released quarterly, about two months after the reporting period. The deflator does however provide insights into the future direction of monetary policy as the BOJ is likely to raise rates when faced with higher inflation.

Trade Desk Thoughts: The Japanese economy has shrunk by an annualized 12.1 percent pace during the last quarter due to lowered business spending and a loss of exports as the global recession takes hold. In the three months to end December 31st the Gross Domestic Product (GDP) contracted less than the 12.7 percent which was reported by the Cabinet Office today.

Forex Technical Reaction: The Japanese yen has strengthened shortly after this release was announced, falling to the previous day’s low of 97.05.